£ °^ 






















p* ^ ^ 

.1 _ 






■^ 



'%. 






A* 






v>* 






'♦ft. 



A^ 



\> 



h, *'o.x* $ 













*& °o' J 







V 



^ O q s , , * ^ «X * „ , y - 




ft 



a5> ^ 













V o x 



^ 






^ ^ 



^<3* 











IN'. ^ 



?£> ^* 



^> r^ 






The Trusts 

What can we Do with Them? 

What can they Do for Us? 



BV 

William Miller Collier 

New York State Civil Service Commissioner ; Author 
of " Collier on Bankruptcy," etc. 



New York 

The Baker and Taylor Company 

5 and 7 East Sixteenth Street 



* 



302?2 



$9 



L-ibrai-y of Conorese 

AUG 4 1900 

Copyright ontry 

SECOND COPY. 

Ot.'ivtred to 

ORDfca DIVISION, 

AUG 7 1900 






Copyright, 1900, by 
THE BAKER AND TAYLOR COMPANY 



ROBERT DRCMMOND, PRINTER, NEW YORK 



19 ( r 



PREFACE 



The problem of the trusts is a momentous one, and yet 
it is unqualifiedly a new problem. The oldest of them 
(the Standard Oil Company) is eighteen years of age, but 
the great majority of these gigantic combinations have 
been established since 1897. Furthermore, those of most 
recent creation seem animated by somewhat different pur- 
poses than their prototype; and they present new problems 
or new phases of old problems. 

There cannot be any doubt that the trusts are filled with 
great dangers to our industrial, social, and political system. 
To say that these dangers are "awful" is no misuse of 
the word. The great advantages of mammoth business 
organizations should not be overlooked. Such organiza- 
tions are necessities in the present condition of American 
industries. They seem to be the only effective agencies 
whereby we can develop our much needed foreign markets, 
whereby we can dispose of our surplus products, and thus 
give constant employment to our workers and toilers. Much 
of our anti-trust legislation has overlooked this fact. There 
is, indeed, a danger that in our attempts to stop monopolies 
we may cripple our productive energies and stifle enterprise 
and bring our country into a condition of industrial degra- 
dation and into bankruptcy. To obtain, however, the most 
that can be obtained from trusts, to achieve the highest 
degree of success that can come from the use of trusts, it 
is absolutely necessary that we guard against their becom- 



IV 



Preface 



ing monopolies. The greatest, the speediest, and the most 
efficient remedy, — the one that should be first employed, — 
unquestionably is publicity; but it may be doubted if that 
is entirely sufficient, either theoretically or practically. 
Anti-trust laws which forbid monopolies, which endeavor 
to prevent all combinations that restrain all competition, 
which fix the punishment that shall be meted out to those 
who violate their provisions, which denounce as illegal and 
criminal all combinations that are formed for the purpose 
of raising prices or that actually do raise prices, — these laws 
are demanded not only by existing conditions, but by prin- 
ciples of right and justice. Anti-trust laws that aim to kill 
the great " octopi " that have reached out and gathered in 
all of the establishments in certain industries, not because 
of any economic superiority in these giant combinations, 
but because they are fed and pampered and nourished and 
sustained by special privileges, — anti-trust laws that aim 
to kill these " octopi " by the abolition of these special 
privileges, appeal not only to our sense of fairness, but to 
our common sense. They are likely to be most effective 
remedies. Their enactment and enforcement will in all 
probability kill many of the trusts and will surely do away 
witfr most of our trust evils. Similar laws requiring pub- 
licity of all those affairs of our giant corporations, which 
affect the public, and laws forbidding over-capitalization 
and also forbidding unfair " cut-throat " competition, give 
promise of speedy and lasting relief. Care must be taken, 
however, that we do not " kill the goose that lays the 
golden egg." Care must be taken that, in ridding our 
barn of rats, we do not cause the barn to be burned. 

The book which is here presented to the public is in 
the nature of a study. It is our belief that the anti-trust 
legislation which has been enacted up to the present time, 
namely, that form of legislation which, in terms, has for- 



Preface v 

bidden any and every combination of competitors, however 
great or small might be the combination; and which has 
forbidden every restraint upon competition, however reason- 
able or unreasonable such restraint might be, and however 
direct or indirect a result of the combination it might be, — 
this anti-trust legislation is ill-advised and is likely to be 
injurious. It clouds and obscures the real danger and the 
real evil. We must restrict and restrain and curb and 
limit; and there are some things which we must prohibit 
and prevent and make criminal and penal; but it is abso- 
lutely necessary that we know when to prohibit and when 
to limit; when to prevent and when to restrict. 

In our first chapters we have endeavored to show the 
phenomenon of trusts, the existence and the mighty growth 
of industrial combinations, their various forms, and the 
economic and legal differences between them, their re- 
spective rights and liabilities before the law. We have 
sought in succeeding chapters to show the extent to which 
gigantic organizations of industry are an outgrowth of the 
conditions of modern competition, and have tried to set 
forth, fairly but fully, the great wastes of competition, and 
the great advantages as well as the disadvantges of the 
trust system. We have defined monopoly, not only as the 
term has been used for centuries in English jurisdiction, 
but as it has been modified by modern industrial condi- 
tions. We have endeavored to show the awful evils and 
dangers of monopoly, — of that absolute or sole power of 
sale of any article, — the complete and dominant control 
of any industry, — which is properly called monopoly, re- 
gardless whether it is the Tesult of a special and ex- 
clusive ' legal right conferred by the sovereign or 
whether it is a power incidental to gigantic size. The 
effect of potential competition — its strength, its weak- 
ness, its limitations — is fully considered. Subsequent 



vi Preface 

chapters treat of the effect of trusts upon the wage-earners, 
especially those who are banded together in labor unions: 
also of the relation of trusts to displaced labor, and to the 
farmers. While there is unquestionably an underlying and 
an unceasing tendency towards larger and larger industrial 
organizations, we attempt to show in the chapter on "Trusts 
and Special Privileges " that in very many, if not in a 
majority, of the cases, trusts are the results of special priv- 
ileges. The evils of over-capitalization form the subject of 
another chapter. The relations of the tariff and of expan- 
sion to trusts are also exhaustively discussed. That im- 
portant phase of the question, the social phase, which is 
so often overlooked, has been considered in a chapter en- 
titled " The Man and the Dollar," with special reference to 
Wm. J. Bryan's famous speech at the Chicago Trust Con- 
ference. The scope and extent of legislative powers over 
trusts, the constitutional limitations and restrictions, are 
also reviewed. 

The momentous questions arising out of trusts, notwith- 
standing their comparative newness, have so far been the 
subject of denunciation rather than of consideration. 
There has been action rather than consideration, and legis- 
lation rather than discussion. So great are the dangers, on 
the one hand, of no action, and, on the other hand, of rash 
and improper action, that we feel that the proper charac- 
ter of a book upon the subject, at this time, should be that 
of a study or an inquiry, rather than a dogmatic treatise. 
The spirit of observation and of investigation is the spirit 
in which we can best approach the immense task of solving 
the trust problem. In that spirit we have endeavored to 
write this study of the great question of the day,— the 
great question of the age. 

Wm. Miller Collier. 

Auburn, N. Y., July 4th, 1900. 



TABLE OF CONTENTS 



CHAPTER PAGE 

I. The Day of Great Things 1 

II. What is a Trust? 21 

III. The Mother of Trusts * ... 35 

IV. The Wastes of Competition 54 

V. What is Monopoly? 88 

VI. Prices and Potential Competition 103 

VII. Trusts and the Wage-Earner . 131 

VIII. Trusts and Displaced Labor 156 

IX. Trusts and the Farmer 173 

X. Trusts and Special Privileges 190 

XI. Promotion, Over-Capitalization, and Publicity, or 

Wind, Water, and Light 208 

XII. Whose Fault is It? . . . 233 

XIII. Trusts and Expansion 260 

XIV. The Man and the Dollar 277 « 

XV. Legislative Powers over Trusts 287 

XVI. The Remedy for the Evils 299 

APPENDICES. 

A. The Federal Anti-trust Law (Sherman Act) . . .331 

B. Analysis of Amendments Proposed to Same .... 334 

C. Sections of New York Anti-monopoly Law .... 335 

D. List of Anti-Trust Laws 337 



THE TRUSTS. 



CHAPTEE I. 
THE DAY OF GREAT THINGS. 

Great accomplishments are the results of great forces 
marshalled into great organizations. It is the day of great 
things, — great aims and great ambitions, great forces and 
great mechanisms, great undertakings and great accom- 
plishments, great opportunities and great achievements, 
great men and great organizations. The greatness of to- 
day is, however, the greatness, not so much of creation as 
of combination, not so much of construction as of con- 
centration. The century that is closing has been marvelous 
in its material development and in its industrial progress. 
What we have done is greater than the deeds of the ages 
that have preceded, because we have combined our efforts 
and have worked more and more in unison, if not in per- 
fect harmony. What we shall do in the future is likely to 
dwarf even the mighty achievements of the present cen- 
tury, because our energies are more concentrated, our forces 
are better combined, our interests more nearly harmonized. 

The tendency of the age towards great organizations 
manifests itself especially in those spheres of activity in 
which we can accomplish results only by some form of co- 
operation, — politics and economics, government and in- 



2 The Trusts 

dustry. The centuries that are gone witnessed many 
mighty nations, — empires that spread over the whole 
known world. But since despotism has been modified into 
limited monarchies or given place to republics, since repre- 
sentative and popular governments have come into ex- 
istence, the nations of the world have never been larger 
or more powerful than to-day. We who are living have 
seen many struggling, discordant, wrangling states coalesce 
into mighty nations. Within forty years Italian unity has 
become an accomplished result after centuries of strife. 
We have hardly laid aside the school books in which we 
studied about the twenty or more petty kingdoms, duchies, 
principalities and free cities that now form the invincible 
German Empire. English colonies are scattered over the 
entire globe. Some of them reach up into the frozen 
Arctic; others lie in the vast Pacific in the southern hemi- 
sphere, antipodal to the mother country; some of them 
are in Europe, some in America, some in Africa, some in 
Asia and many others are islands of the sea. All of them 
enjoy to-day a greater independence and freedom than they 
ever had before; and yet the movement towards imperial 
federation of English colonies is growing irresistibly. Our 
own great civil war, with its bloody and costly strife, dur- 
ing which the doctrine of State rights and the heresy that 
this union was a perishable and destructible temporary 
federation were burned up in the fire of battle, was one of 
the strongest proofs that the tendency towards centraliza- 
tion and combination in government can not be overcome. 
But the si riking fact of the history of the century 
lias been the tendency towards industrial consolidation. 
Business organizations are mammoth in size; business un- 
dertakings are gigantic in their scope; business manage- 
ment is of infinite detail. The cause of all this is that 
business opportunities have so mightily increased in size 



The Day of Great Things 3 

and number. The great improvements in the means of 
travel and transportation and communication have revolu- 
tionized every kind of business. Railways are trans-con- 
tinental; the world is girt with cables; telegraphs and 
telephones permit such immediate communication that the 
exchange of thought and idea is almost as quick and al- 
most as subtle as mind reading. Steamship lines run from 
port to port with the regularity of a river-ferry service. 
The nations of the world are brought into closer contact; 
the products of each zone are exchanged in every other 
zone; the wants of the Oriental are supplied from the 
mills and factories of Europe and America, and in exchange 
the Caucasian seeks the wealth of Cathay. China is carved 
into spheres of influence by European nations; Africa 
is parcelled out into European provinces. Every great 
power, including even the United States, has now its colony 
or province or annexed territory in the tropics or in the 
opposite hemisphere. Eaw material is with ease brought 
from one quarter of the globe to another and returning 
ships take back the manufactured article. Trade is no 
longer merely local. The market, to-day, for every factory 
and every mill, is the world. Two generations ago it was 
confined to a locality that was circumscribed by the circle 
whose radius was the stage route. Great are the oppor- 
tunities and possibilities of the age, — great, amazingly, 
enormously great is the value of the commerce and manu- 
factures of to-day. Yet before us and ahead of us is the 
commerce and the stimulated production and the incalcu- 
able riches that will come when China, India, the Philip- 
pines, and the other countries of the Orient, with their 
hundreds of millions of inhabitants and their wealth of re- 
sources, shall have become consumers of the comforts of 
civilization and producers of its material needs. If great 
business organizations have been necessary in the past to 



4 The Trusts 

accomplish economical production and to create and dis- 
tribute wealth among the nations, shall we not need, in the 
future, even greater organizations? " Canst thou pull out 
Leviathan with a hook? " 

Industrial history is the record of industrial combina- 
tion. Two centuries ago the business of manufacturing 
and the business of commerce were all done by individuals; 
but business was conducted within the smallest and most 
circumscribed limits. The product was small; labor was 
manual, or, if mechanical, it was rudimentary in its sim- 
plicity. The market was local; cost of production was 
great and prices were high. Inventive genius gradually 
produced new machines; the power of steam was applied 
to their propulsion. But machines could be used advan- 
tageously and profitably only by a division of labor and by 
individual specialization. This necessitated bringing to- 
gether into one enterprise large numbers of wage-earners. 
The total expense of carrying on a business became so great 
that individuals singly and alone could not assume it, but 
two or more individuals by uniting their capital and skill 
made it possible for larger business enterprises to be con- 
ducted, and the partnership became the form of indus- 
trial combination. Naturally only a few persons could 
advantageously be embraced in any one partnership. It 
was not a good means of combining or concentrating very 
large amounts of capital. As machinery became more com- 
plex, as it became necessary more and mofe to subdivide 
labor and to specialize, and to bring together into one 
factory or mill an increasingly larger number of laborers 
to produce, and to organize into one force a larger number 
of persons to sell and market, it became necessary to enlist 
the capital of so many persons that not all of them could 
have actual oversight and management. An industrial 
organization in which the capital of many could be com- 



The Day of Great Things 5 

bined, but in which the liability of those not in actual 
control could be limited, was the natural result of these 
conditions and the corporation soon became the usual form 
of combination in business enterprises. To-day the cor- 
porate form is rapidly displacing the individual and the 
partnership. Individualism in business, — absolute indi- 
vidualism, — that individualism which produces by the toil 
of any one man everything which that one needs, — exists 
only in the state of lowest savagery, if even there. It is 
equally true that individualistic production, in the broader 
but more usual sense of production by persons unassoci- 
ated in corporate form, is becoming rarer and rarer. Not 
only is the business of the world done by corporations, but 
the corporations are daily consolidating and combining. 
Capitalization is becoming larger and larger. Millions and 
hundreds of millions of dollars of capital are brought to- 
gether in one centralized organization; thousands and 
tens of thousands of men are subject to one management. 
The year 1898 saw over $900,000,000 concentrated in 
mighty industrial combinations. The first two months 
of 1899 saw business corporations formed whose capitaliza- 
tion was $1,100,000,000. It did not continue throughout 
1899 at that rate, but the month of March, 1900, has seen 
the formation of one single combination of the steel and 
allied industries in which Andrew Carnegie and his partners 
are interested, whose capitalization, — the capitalization of 
one corporation, — is $200,000,000, a sum that is not an 
excessive, but rather a modest capitalization of its earning 
capacity, which, in net profits, for the ensuing year is esti- 
mated at $40,000,000, or twenty per cent upon the capitali- 
zation. 

The progress from individual to partnership ownership 
was slow and steady. The transition in no manner affected 
the social or political organization of the community; its 



6 The Trusts 

effects were almost wholly economic. In nearly all these 
cases there remained individual control and individual lia- 
bility. The change from the partnership and individual 
to the corporate formation has been, from the start, criti- 
cised, resisted and opposed, but its advance has been 
rapid and continuous, and, notwithstanding many apparent 
evils, beneficent. The past thirty years have seen corpora- 
tions grow and increase greatly in size. But the tendency 
for great corporations to merge into still greater corpora- 
tions until nearly all the productive forces in any one in- 
dustry have been amalgamated into one great body has been 
a comparatively recent movement and has come with sud- 
denness and without preparation. In a list of trusts and 
combinations appearing in an article by Byron W. Holt in 
The Review of Reviews for June, 1899, there are contained 
about one hundred and twenty corporations, the capital of 
none of which is less than ten millions. About one half 
of these were formed in 1899. There are comparatively 
few in the whole list that have been formed more than five 
years; and of these the majority have been reformed and 
reorganized within that period. In 1899, The Journal of 
Commerce in its year-book published a list of three hundred 
and fifty-three trusts and combinations in existence in 
March of that year. These trusts were then capitalized as 
follows: common stock, $4,247,918,921; preferred, $870,- 
575,2G0; bonded indebtedness, $714,388,661; total, $5,- 
832,882,842, or an average of nearly $17,^00,000 for all 
of the three hundred and fifty-three combinations. These, 
it is to be borne in mind, are nearly all corporate com- 
binations. In them are included only a very few of the 
combinations which are merely agreements to raise prices, 
to control production, to adopt rules to regulate trade, or to 
enable members to protect themselves from encroachments 
upon their business. An eminent authority has stated that 



The Day of Great Things 7 

it is probable that of great incorporations which would 
popularly be called trusts, there were by July 1, 1899, more 
than five hundred in the United States, with an aggregate 
nominal capitalization of from six to eight billions of dol- 
lars ($6,000,000,000 to $8,000,000,000); and besides these 
there were about five hundred combinations and pools 
which were not corporate in form. We here give a list of 
the most important industrial corporations existing July 1, 

1899, with the amount of their capitalization, bonded in- 
debtedness, date of formation, and place of incorporation. 
Only those having a total capitalization of at least ten mil- 
lions of dollars are mentioned. (For list see pages 8-13.) 

More and more does the tendency for industries to com- 
bine into great corporations manifest itself. Our list 
shows those in existence July 1, 1899, but during that 
year, according to The Commercial and Financial Chronicle, 
there were formed corporations having a total capitaliza- 
tion of $3,512,280,000, made up as follows: common 
$2,285,555,000, preferred $899,775,000, bonded indebted- 
ness $326,950,000. One thousand millions of this were 
probably included in the list of The Journal of Commerce 
above mentioned as brought down to March, 1899. If so, 
the balance or $2,512,280,000 should be added to the $5,- 
832,882,842, in order to bring the list down to January 1, 

1900, making the total about $8,350,000,000 at that time. 
As already mentioned, the present year 1900 has, in March, 
seen the incorporation of the Carnegie Company, — one 
corporation, at $200,000,000. 

Quite equal to the aggregate of all the wealth that is 
represented by the capitalization of these gigantic indus-. 
trial corporations, is that which is combined or pooled by 
virtue of mutual agreements, sometimes written, some- 
times verbally expressed, and sometimes only implied. 
Such are the combinations of the anthracite coal miners, 



8 



The Trusts 



•si 

5 



.o .o .o 

.o .o .o 

.o .o .o^ 

•IO 'O • <3> 

•o • O* *00 

;CQ *t^ ^O 

•H • r-T • CO 



.00 

loo 

*o"o* 

• 00 

^O^IO 

•no* c* 



00 

o o 

wo" 
00 



00 

o o 

oc L 
co"o* 
coo 

HO^ 

co* co* 



,00 

:88 



: i>co 






00 
00 
00 
0*0" 

°s 

OO 
-*of 



000 
000 
00^0 
00*00 

CO O tH 
O *0 CO 

«o"co"cx" 

CO tH 



OOOO 

OOOO 
. ,°l » 

o"o~co*o* 

00 CO O 

wooq 
030"* o" 

01 iH 



.O 
.O 
.O 

*o~ 
• o 
•o 



000 
000 
°~°o. 

o~co~o 

^ CD O 
t*< OlO 



00000 
00000 
oo_ O^OO^ 

WOO^OiO 
01 o o O l> 

©owwo 

^WOM^ 



+3 +J ■*-> 

on a 

£•-§ 



OO 

00 

OO 

0*0* 

8§ 



€©■ 



OOO 
OOO 
OOO 

0*000" 

o coo 
^000 

roco'co" 

CO CO 



OOOO 
OOOO 
CO OO i> 

i>*o"o*o* 

WOOiO 
ONO^ 



OO 

00 

OO 

0*0* 

88 



s 



O £>"* < 
0* 1 



OOO 

OOO 

000^ 
0*0*0" 

OOO 

00^ 

>"o"io"»o 

i OICOtH 



OOOO 
OOOO 

qcoqo r 
o"^"o"o 

O CO OO 

10 00^00 
«^*£>Tjro~ 

r-i OJ tH 



OOOOO 

OOOOO 

0^0 00 
10*000 10* 

WO O O l> 

CDOONt* 

' c ^cooo"co" G ^ 



gas 









i 

s 

o 
u 

fl 



® £ a 



1000 

C5 O 
00 00 



leg 



OOOOt-lOt-OOOOOCQO 

wooooooooooooo 
00 000000 00 00 GOOD 00 0000 00 



000 

00 00 



TJH r-4 OOOOO-* ^ 

000000 hfl 

00 00 00 00 00 00 a 

^ ,-| r-n rH tH r-. m 



d 

CD 

1 

1 :& 

2 o d 



O 3 I 

8.2 

PQfa 

d d 

0J OS 



d a 



fir 3 *' 3 

d CI £™\Z 
.H .2 ^ w a 

£ S S g .2 



o 

3 
bo 
d 

■ =B 

a a> aj 
1 ft . _9 



" cm 



.2 I 5 3 



os «3pq II _: ja 

.2 .£ 'cj t £ £ £ 
"S "§ -• 8 '3 '5 *S 

y< y< w fife S ^ 



o 

JZJ 
M 

s 
PQ 
P 
< 

g 
3 



* 



. o .0 



^1 



o S 



OS-- 

M J> O W 



: o 

bD 
' c3 



d d£ 
.2.5 d 



-5^m 



7? ^9 rd 

Vffl cj ©O o 
P bX)^ to © d 

flU d^j flr^ 

o % d -. g 

5 ^ > d £\5 

Sbowsa 



The Day of Great Things 






Oj3 



o 
o 
o 

© 

o 



o 
o 
o 
cT 
oo 



o oo 

o oo 

00 OO 



Of 

©^ 
oo 






o 

o 
o 

© 

o 
10 



ooooo 

ooo oo 
©o©©o 

OO x^ o 10 

oqooo co 



oo 
o o 
o«> 

§*©~ 
CO 



oo 
oo 
oo 

oo 

oo 

iOO 



ooo 
ooo 
ooo 

oo~o~ 
ooo 
©^©o 

io©d 



is 
£1 



ooo 
ooo 
©oo 
©o^©" 
ooo 
woo 
code 



ooooo 
ooooo 
o ©©_©© 

ddwoo" 
oo ^ o o 
loooooq 

coc!fao©cQ 

CO ^ ^H H 



oooooo 
oooo o o 
o oo *c© © 
©~o*©~^©~© 
o^o co © © 
*o rfi o © o © 

cfe>©J>to© 



ooooo 
ooooo 
© © © © ©^ 
©©"©~©*©* 

ooooo 
wo^o © ©^ 

£>CO©*0*10 
COOOCi 



^5 o 



h» f-b t-s* >■* kH 



11 



HO? 



fa 



© 
© 

00 



©GO OOOOO 
o © O © o 

OOOO 00 00 00 



00 00 © © © 
O © £> © © 
00 00 00 00 00 



© 00 © 
© © © 
00 00 00 



«5 
S3 



o 

u 

bo 

fl 

ill 

. CO M 

^ O M fl 

^ o » 

o w.2 5 
5 £P§5 

d II s 

2 ."5 s £ 



6 



3 

M 

la 



< 



o 

o 

8o 

§^ 
•§? 

fl^ 

C3 O 

ll 



fl 



o 



.'3 



6 © 

fli 

fl a a 



<<i^>w£ 



n. w a) * © to 
boS * £r a g 
£ O, -„ ^ t* m 

Jill" 9 



CO 

H 

M 

« 

H 

CO 

p 

Q 



o 

o 

bO 

fl 



fl o 



H 



fl fl 

c3 tf 



0> o 



bO 

"bcS 



fl^O 
© • ^ 

fe fl cJ 

^ s^ 

.- fl fl 

tH £ O 

© ^5 ■ s 
fl -^ ^ 



IO 



The Trusts 



09 

a 



o 

o 
o 

tH 

d 



.OO 
.OO 
.OO 

•00O 

•wo 



o 
o 

o 

d 

o 
to 



» IO O tH 



:1 

"OD 

:o 

•CO 



© o 



OOOOO 

OOOOO 

o oo^co o 

00 cqioo* 
o 0^0 0> iO 

dd dofd 



000 
000 
000 

odd 

OiOlO 
Ot»H 



000 

000 
000 

cTdoo 

0005 

OOf-H 

ddo~ 

O* tH 



a* 



o 
o 
o 

d 
o 
o^ 
of 



OOOOO 

OOOOO 

o^o_ 0^0 o_ 

0~dr* d 

000* 100 
o o^co 00 co 

ddodc\Tco 
COOl coo* 



000 
000 
000 

do~d 

000 
000 

odd 

T-lt-O* 



OOOOO 
OOOOO 
OOOOO 

do"ddo 

OOlOWO 
<0 O i> 00 o 

d^o~ do 

CO i-H CO 



000 

000 

OOt-I 

o~o~*> 

o ow 
qoco 

d^~o~ 

CQO* CQ 



E (-■ <D 
© O** 

•a 2 S 

£~a 



Hj (-5 l-s H^ H5 



. © 



S *-» i-a 






w g § 



00 



•OS 

.00 

•00 






<o ooocow 

O O 0000 

00 0000000000 



Ol CD 

oa o 

00 00 



OOJOiH 

O 000 

00 00 00 00 



OO CO 
00)00 
00 00 00 



^3 

S3 

•e» 

1 



a 



en S3 

If 

CO T3 

p S3 

Q * 

o 
M 



« 
p 

p 

52; 

PS 

w 

K 
H 

w 

.J 



' 

I? 

^*C0 

! 8 



= o 



• o 



1 ^°o 

05)^ 

O O o3 « 



o So a 



CO 

H 

M 

PS 

CO 



O 

O 



CI 



. © 

i 

< 



^3 ^ ^ 

T3 T3 T3 

© © © 
*_> -*■» >^ 



3 a c a 



*£d8 

2 ° b -. 

O o a> °3 

S3 »-5 «J 



P 

R 

HH CO 
CO 

o * 

o 9 



M M rG 

© -^ t 3 

a fl S 

a a) o 



oO§ 
gj g 

«* — , 5 ^ 

•2 "3 S o 

© © CO ri 

p © . - h> 



o e 
§1 



^ o 



ir 1 ^ ox 

o ^So 

3 i|l 

^j a a a 

W o3 as aJ 
ti3 o o o 



© © © 

a s a 



The Day of Great Things 



n 



~< 2 



.© 
.o 

.o 



:<^ 



€©■ 



OO 

oo 



o o 



o^oo ;co 



© o 



OO 
°°- 

©~©~ 
oo 
c*oo 



oooo 
ooo o 
©©^©© 

o'o'o o 
oooo 
o oo o^ 

COO" OOO" 



oooo 
oooo 
©o^o^o 

o'o'o'o 
O O o o 
O tH OO 



ooooooooo 
ooooooooo 
o o o© o^o © © © 

0~ 0~ 2> ©~ ©~ O" 0~ ©~ ©" 

ooooooooo 

©©*>©©©©©© 

c£ 00 c<f <D lO i-T io © w 
OC3 C* tH COtH 



1 8 

Ms 

£ «j 2 



oooooooo oooo ooooooooo o o 

oooooooo ooooo oooo oo oo oo 

o © © ©©^© ©^© ©^© © © ooooo ©©^©^© ©^© 

©'©'©'©"©"*©"©"©*' ©*©*©" ©"©"©©*©' v Mr©'©~© , ©~©'©' > 

oooooooo o o o o o o o ooo o o o o o o 

C* O O CQ ©© O O Oi-HOOOOOOrHO^O© oo© 

^jT^ o'^^^o'co" © j>tjToo o cTth ©*©"« ©*©~o"©~c<f 

i-l O© C* ~H T^T^T-llNrSHT-IH^CQCQWr-lCClTH 



© ©"£* 

r* O g 



fc 



Oh^h 



5£££ 



H» *£ !-£ H» g g ^o i 



® ® d 

a si 



00 

© 

00 



<c cc 2: 

£*s 

fa 



!>©©CQ©©©0 

oo©©r— ©©©© 

00 00 00 GO OO 00 GO 00 



000©00©00 0©00©©i>©0© 
OiOOOO©0©Oi©©0000© 
COGOOOOOGOCOOOGOQOOOGOGOGOOOOO 



a 






© 

-J 

ro © 
••a o o 

S §TS 

C» oj g 

. o J 



03 c3 

15 _. 



o 

^ go. 2 
© 





_ *I3 5S 03 co 
O ^hp 03 cl rt 

o3 "73 ^ TJ n^ 
r ^ © © Q3 Q3 

eg "a 'a "3 "a 



o 

JP?Oo 
B> p,o 
2ts 2 © o 

-° _ _, Qj © 
"2 © © fl -*- 3 

,d -5 .S . S TO 
.2 .2 -S .2 'S 

© <D © C ,_^ 



o 

o 

h-l o 



OS® 

■% -p © © 

c3 O O © 



s § 

U fl o ft 
© o o 2 

QQHH g 

S3 goo 

.2 ^ G^ 

« c?g © 



w© 

. p. 

6S 



QG 



fl s 



t)p 



12 



The Trusts 



■a 

CO 




ooo 

O C5 
























8 




■ 




o 

o 




8 : :8 


■oS 




o - 












. . 








o^ 




o . o . .o^ 


5*1 

B-g 

0.0 




o"? ; 












• ' 








o~ ' 


• 


©~ • o" * • o 




© o 




















o 




iO *t-» ■ *0 




°.g : 












* | 








lO 


• 


r}< - l> • • lO 


















• 










• ; 


|iO • JCO 








O 


> 


oo 


© .ooo 






O . OOOOO .O 


*d 






o 


oo 


o .ooo 






O .OOOOO ,© 


v . 






o 


oo 


o» . ©o © 






O . O O O CQ ©^ .© 


|5 






©** 


2 «=>" 


©" •o'lcic 






O* - •©"©"©"!>©* * CO 






O 


oo 


O 'OH« 






o • o o o ic o • © 






o 


oo 


io *oo cc 






O 'OOWJOIO • © 
















k 










c 




iOJ> 


cs "^a»a 






© • JO lO CQ CQ Th 'CO 






cc 


► 


^ cq 


tH • 






tH 








€£• 




* 






" • 


So 




o©o 




oooooooo 




oooooooooo 


.2 o 




ooo 


► 


oooooooo 




OOOOOOOOOlO 


w^.'i 




ooc 


> 


oooooooo 




OOOO 000003 


d eeCG 

Su- 
















O CQ C 


> 


OOOOOOOlC 




OOOOOOCDOOl> 


ms 5 




O CQC 


> 


©OOOOOOC1 




OOOOOOi>OOQ0 


ssS 




ioi>c 


> 


ooooooocc 




OOOOOIOCQOOC* 










k 








£>ooic 




io«>oioocooac 




O05OOC0WQ0OO00 




^■CQ CO 


0OWt-(Hi-I tH 




tH t-< Hrtrl CQ 


Where 
Incor- 
porated. 
















• H^ H^* h-J >H >H (-J* (^ A 


£s3 








































00 • • vH 








































© . .© 








































00 • '00 










































TH • «TM 


0)tflfl 




©coo: 


> 


©©io©©oococ: 


► 


COOiOOiOOOi^OOOiCQ 




G^ O C~ 




OC1©00©©0" 


» 


OiOiOiCiQ0O505O505t> 




oooooc 


> 


oooo oooo oo aooooc 


> 


00 00 00 00 00 00 00 00 oooo 




tH tH r- 


1 


MHHrtHHrtr 


1 


▼Ht— It— lr-iT- 1^— IHHr IH 






• : 






















• o -• 






! .do 


to 

•3 


8 
1 

CQ 

O 
P 

Q 

O 

3 
fi 

n3 

W 
W 
H 
Xfl 

Q 

B 

<1 


I-H 

SI 


. P5 

: 3 

: « 

: w 




• c 

• > 

u 
c 




if 


> 

u 


c 

c 

c 

4. 






CQ 

1 


O CD ^ 

O M (H 

. .— 03 


c 

Q 
> 


■> 


• : a bD 

• -.2 c 

: : 5 a 

::ov 
: :8-s 


1 

41 

a 

CU 

Oh 


c3 o 
_ w 

c „o C 

a o x 

2* c = 
*2 © — 
^ a." 

'a™ | 

"& 8 5 


: < 

PS 

H 

E 

m 

3 


c 
1 

B 
1 


CJ o d ^ 


> o a 

S '-^ 

flic 

s &5 


1 

g 

| 

3 
w 


03 "j »-^ 

CI) l " H 

i3 © d C 

of? o) CJ 

aSStf 


o - ! I<^c^ 

pq ^_ • .2 © 

© g d fl-gS 
^a 5 5 > « 

.2 -g -3 1 bb a 

is fe fc o a '5 




o 

a 




a- a> a> r •— e *-= 










►> h* 


V 




< 


< 


< 


> 


K 





P 


p 




< 


< 





a 


H 





o^^^ 



The Day of Great Things 



13 






oco 
00 
00 

o"c* 
o*-« 
o 



o 
o 
o 
o 
o 






00 
00 
<oo 

o~^t? 
00 
00 



o 
o 

o 
o 



o 
o 
<o 

o 
o 

10 



00 
00 
00 

0*0" 
00 
10 o 



000 
000 

0*10 o 

O 7-1 O 

000 



•2° 

fi 2 a 
air S 

8-1 



o 

o 
o 

o 
o 
o 



000000 
000000 

O O^OO o ^* 

©o~o~o~«o 10 
000000 
000000 o 



o 
o 
o^ 

o" 
o 
o 



00 
o o 
00 

o~o" 
00 
00 



0000 
0000 
o 00^ o^ 

o~o"o~o" 
0000 

iOOOO 



000 
000 
o^c* o 

o 10 o 

ObO 

o> o~o" 

CO<M 



«? . 'fi 

u u a» 
CD 0*3 

M5 



fc 






55 



•-5 



>* 

fc 



fi 



.J8 . 



1 t1 * 



O o 
00 00 



gig 



o 
00 



O O tM O 00 
00000 
00 00 00 00 00 



tH iO i>- 

o o 00 
00 0000 



0000 

o o 00 o 
00000000 



i>o 

o o 

00 00 




S3 



• o 

-u 

• bo 

• fi 
•"3 - 

. cd O 

It3 a 

• «*fi 

^ .9 fe S > o 

co Id g* GC _. 

M S O ^^ * ."fi 

Woqo * g » a 
fi fi * ^ o ^ a 

cd a> J2 G ft -~ a> 

a a S g|s a 



« g 



o 

. CD 

CO CO 

H fi 

3-S g 

m* ^ 

M Ctf 03 

grfi f> 

3 3 

O CO 
O CD 



CO . 

P o 

00 

Ei 

3 s J 

gO ©^ 

s n a ^3 



p 

bpc3 

.a * 

fi © 

firtf 

o * 

«w O 

d co 
O to 

W CD 

■4-3 «— • 

CD M 

ss 

CD fi 



o 

u 

fi 

"S 

a 

eel eg 

• r-l +3 

rfiOQ 

© o 

'fi c3 
^5 cjfi 

^fi .9 



a 



s^ 



CD 

CD fi 'O 

§ s g 

OOP 



H « « O 



■ , H ••-'CD — ^—4 

■♦-3 •** *S fi ^3 

fi fi g-fi 8 

© © 2 H *3 
+? "t* « 03 c3 

fi fi Hh, 

MM l«3*H 



14 The Trusts 

the pools of the insurance companies, and the greatest of 
all pools, those of the great freight and passenger associa- 
tions whose purpose is merely to fix rates. Other exam- 
ples of combinations that are not incorporated are the 
organization long maintained by the steel rail manufac- 
turers; the agreement or unison between Armour, Swift, 
Morris, and Hammond, — the " Big Four," — in the meat 
business; and countless associations of merchants, both 
wholesale and retail. The extent to which industry is under 
the control of corporations of enormous capitalization or 
of individuals or corporations acting in combination, can 
be best appreciated not so much by attempting to count 
the number of such corporations or combinations as by 
considering our various wants and needs, the commodities 
and products that we use, and inquiring how many of them 
there are, the production and distribution of which are, 
either wholly or to a very great extent, under the control 
of such corporations and combinations. There is hardly 
anything (excepting vegetables, fruits and a few other 
agricultural products) which we eat or drink or wear or 
use or enjoy that is hot largely controlled either in its 
production or distribution by great corporations or else by 
combinations of individual competitors. The service of 
supplying those of us who live in cities and large villages 
with many of our absolute necessities is necessarily almost 
a monopolistic privilege. Our water and our means of 
illumination, our gas and our electricity, are all supplied 
by corporations of great capital and generally without com- 
petitors, except in those cases in which the municipality 
itself has assumed the monopoly. The price of nearly 
everything we use is largely affected by the cost of trans- 
portation, and the means of transportation are in the 
hands of great corporations. But aside from these things 
which are inseparably connected with public service, the 



The Day of Great Things 1 5 

rendering of which is naturally monopolistic., we find that 
all or nearly all of the material comforts of life are now 
supplied to us by industrial organizations and combinations 
of vast capitalization. Look at the list of articles made 
or sold by these corporations: fertilizers, alkali, beet 
sugar, brick, brass, bicycles, railroad cars, cotton oil, elec- 
tric-heating apparatus, fish (packed), window-glass, gas and 
electric lighting fixtures, hides and leather, ice, linseed oil, 
lithograph productions, sewing machines, malt, school 
furniture, ships, silk thread, whisky, wire, steel-hoops, 
sugar (cane sugar), thread, tin-plate, tobacco, woolen 
goods, writing paper, copper, snuff, bolts and nuts, borax, 
steel, lumber, pharmaceutical products, beer and ale (there 
being combinations of breweries in the following cities: 
Chicago, San Francisco, Pittsburgh, Boston, Cleveland and 
Sandusky, Baltimore; also Milwaukee and Chicago); coal and 
iron (industries of Colorado, also of Tennessee), electric-car 
lighting apparatus, steel cars, cement, plug tobacco, cot- 
ton yarn, matches, electric boats, electric storage batteries, 
sewer pipe, chemicals, general electrical apparatus, glu- 
cose sugar, granite ware, Cuban tobacco, paper (news and 
printing), silver plate, smokeless powder and dynamite, 
steam pumps, " Bourbon " whisky (Kentucky distilleries), 
iron (Lake Superior mines), cellulose, biscuits, crackers and 
bread-stuffs, carbon, carpets, enameling and stamping, 
white lead, salt, screws, starch, tubes, wall-paper, pine tim- 
ber, passenger elevators, plate-glass, print cloth, iron and 
steel, baking powder, rubber goods, coal, window-sashes and 
doors, flour, petroleum and its by-products, whisky, rope 
and twine, steel beams, steel rails, beef, coal and iron, 
paper bags, typewriters, fruit, shoe machinery, cast-iron 
pipe, dye-wood, flour, glue, leather, rubber boots and shoes, 
varnish, writing paper, etc. All the articles just men- 



1 6 The Trusts 

tioned are made by corporations none of which are capital- 
ized for less than $10,000,000. 

Even more important than the amount of the capitaliza- 
tion are certain facts showing the extent of the control 
over the various industries by these corporations and the 
number of smaller concerns that have been amalgamated 
into them. Thus the Kentucky Distilleries Co. embraces 
fifty-seven distilling plants; the Union Typewriter Co. is 
a combination of the five leading typewriter manufacturing 
companies; the American Agricultural Co. is to embrace 
twenty-three fertilizing plants; the National Wall Paper 
Co. was formed for the purpose of consolidating thirty 
concerns formerly competing with each other; the Otis 
Elevator Co. embraces thirteen concerns and turns out 
eighty-five per cent of the passenger elevators made; the 
American Brick Co. controls the market in New York City; 
the Atlantic Snuff Co. embraces all but two of the snuff 
factories of the country; the American Tin Plate Co. is 
a consolidation of about forty plants and two hundred and 
ninety mills; the American Cotton Oil Co. is a union of 
one hundred and twenty-three properties; the National 
Biscuit Co. includes ninety per cent of all the large bak- 
eries in the United States; the National Starch Co. is a 
consolidation of about twenty companies; the American 
Linseed Oil Co. owns eighty-two plants or eighty-five per 
cent of all those in the United States; the Writing Paper 
Trust was projected as a consolidation of thirty-five mills 
in the Connecticut Valley; the National Carbon Co. in- 
cludes all the American companies in this industry and a 
majority of all in the world; the Consolidated Ice Co. em- 
braces ten or twelve companies in New York and Maine, 
while to ensure absolute control the American Ice Co. was 
formed. It has absorbed the Consolidated and the Knick- 
erbocker and has for this year a practical monopoly in 



The Day of Great Things 17 

New York City, owning the available supply of ice and all 
the refrigerating plants, and having contracts to take 
the surplus ice made by all the breweries and other private 
ice plants, besides possessing almost exclusive docking 
privileges. The assets of the company are shown by the 
following clipping from The New York Herald: 

Mr. Shearn first introduced in evidence the charters of the Con- 
solidated and Knickerbocker Ice companies and of the American 
Ice Company, showing the directors of the last named. A state- 
ment showed that the American Ice Company owned 29,337 shares 
of the preferred and 59,981 shares of the common stock of the 
Consolidated Company, and 55,768 of the common and 37,952 
shares of the preferred stock of the Knickerbocker Ice Company. 
[The stock of each of the last two companies consisted of 100,000 
shares.] William McClure, Secretary of the New York Stock Ex- 
change, produced the statement of Secretary Scott to the Exchange. 
It shows that the American Ice Company owns 118 ice-houses, 32 
factories, and 112 bridges. It leases for along term of years twenty- 
six ice-houses and twenty-one ice plants. It harvests ice on the 
upper Hudson, Lake Neha'gh, Lake Matooch, Croton Lake, at 
White Haven, Pa.; East Mahoney, Pa.; White Lake and Green- 
wood Lake, N. Y., and Lake Schonk. Ice is sold in New York, 
Brooklyn, Philadelphia, Camden and Atlantic City, N. J., Balti- 
more, Md., and Lakewood, N. J. The total output is 4,500,000 tons 
a year. 

The American Malting Co. embraces thirty companies, 
nearly all in the United States; the Glucose Sugar Refin- 
ing Co. controls all the refineries of that kind of sugar in 
the United States. A short time ago its president declared 
that it had no rival in operation. The International Silver 
Co. includes twenty-four companies, or seventy-five per 
cent of all in the United States; the National Steel Co. 
was formed to include about twenty companies; the Royal 
Baking Powder Co. was a consolidation of all the compan- 
ies in that industry; the United States Rubber Co. is said 
to control the trade of the country in rubber boots and 



1 8 The Trusts 

rubber shoes; the United States Varnish Co. was projected 
to include all the concerns in that business in the United 
States, and likewise the United States Dyewood and Ex- 
tract Co. started out to amalgamate all in that industry 
in the United States. Not one of the many corporations 
before mentioned is capitalized for less than $10,000,000; 
while scores of them are capitalized at from $40,000,000 
to $200,000,000. 

Great, indeed, are these industrial combinations. Mul- 
titudes, whose numbers exceed the population of many 
countries, are dependent upon them for their supply of the 
commodities and necessities of life. Their employees, de- 
pendent upon them for a living, outnumber the armies of 
the mightiest sovereigns. Their capitalization rivals the 
wealth of nations; their incomes surpass the revenues of 
states. Their power is centralized; it is sometimes re- 
garded as irresponsible. The rights of the community 
and of employees and even of the small shareholders, the 
minority, are more or less ill-defined, and not infrequently 
are entirely disregarded. 

Are these mighty institutions a menace to industrial 
progress and to human liberty? Can they, by acquiring the 
means of production and the agencies of distribution, tax 
the world at their own selfish wills for its food and drink 
and clothing and the thousands of comforts which have 
become the necessities of civilization? Can they extort 
from us what they will, or even take more than they fairly 
ought, as a price for the things we must have? Can they, 
by absorbing or crushing out all other producers, become 
the sole employer of labor with power to decrease wages 
at will? Can thej become the sole buyer of all our raw 
materials, and offering the only market, lower the price to 
what they arc willing to pay? Can they, by gathering into 
their hands all of the things, or all of any one thing which 



The Day of Great Things 19 

we need, make us industrial slaves, and then deprive 11s 
of all other liberties? Can they pre-empt the fields of in- 
dustry, and deny to all others the power to work for a liv- 
ing, to acquire wealth, and to achieve success in business? 
Can they close the " open door " of opportunity? 

The very large is always terrifying at first, but it is the 
unknown that fills us with greatest fear. When we be- 
come acquainted with the vast or profound it no longer 
frightens us. Let us, then, filled with hope that industrial 
combinations may not be liberty-crushing, and yet moved 
with courage to combat them if we find them threatening 
us, study them to ascertain their causes, their methods, 
their benefits, their evils, their limitations. Other great 
things have in the past filled us with terror. We have 
tried to destroy them. Sometimes we have succeeded. At 
other times the forces were irresistible and we have tried 
regulation and control, only to find that the irresistible 
when controlled were beneficent. The benefactors of the 
world are they who have taught us how to make use of 
these controlled forces, these mighty elements. We owe 
something to the man who invented lightning-rods to 
ward off from us the lightning flash, but this debt is insig- 
nificant compared with that which we owe to the inventor 
of the telegraph, the telephone, the electric light, or the 
electric motor, — inventions that were the result of a con- 
trol and regulation of a mighty force. 

All forces may thus be used to advantage. The Creator 
did not turn them loose for no purpose. Universal ten- 
dencies are the results of great, though sometimes unseen, 
forces. These forces are to be utilized if possible. The 
movements of those forces, — the tendencies of the times, — 
may le the uncontrolled and unregulated, the harmful and 
wrongful, action of those forces; but, when these ten- 
dencies are progressive through all the ages, when their 



20 The Trusts 

manifestations in the past have been the accompaniments 
of civilization, we may, at least, have hope enough and 
confidence enough to attempt their careful study in order 
to see if they cannot be used instead of abused, utilized in- 
stead of neutralized, made creative and productive instead 
of destructive. No change is brought about that does 
not have attendant evils. The wise man, however, does not 
destroy the new thing. He accepts and uses it, avails him- 
self of its advantages, and guards against its dangers. Can 
we do this with the great industrial organizations of the 
day? 



CHAPTER II. 

WHAT IS A TRUST? 

Men frequently get bad names. Sometimes they de- 
serve them; sometimes not. Deserved or undeserved, it is 
hard to get rid of them. " The best thing/ 3 says a well- 
known American humorist, " that could happen to some 
people would be to lose their reputations; perhaps they 
could find better ones." Words, like people, sometimes get 
bad names undeservedly. They are given meanings that 
suggest the vicious, the bad, or the tyrannical, when per- 
haps their true meaning is foreign to all these qualities. 
a Trust n is such a word. It pertains primarily to one of 
the noblest of human faculties, but to-day it has an appli- 
cation to industrial affairs that makes it to many, sugges- 
tive only of an enormity, — a gigantic, merciless, oppres- 
sive, price-raising, production-strangling, wage-reducing, 
business organization. Xot only has the word " trust n 
been thus perverted from its original meaning, but, in the 
popular use of it as a legal term, it is to-day a misnomer. 

The first combinations called " trusts " were properly 
designated by that term. The earliest of them was the 
Standard Oil Trust, which, as a trust, was formally organ- 
ized in 1882. This was a trust in the correct legal sense 
of the word. The several firms and corporations which 
sought to combine their interests did not merge them into 
one corporation nor sell them all to any one individual 
or set of individuals. On the contrary, the several proper- 

21 



22 The Trusts 

ties, whether corporate or individual, remained in equity 
distinct, but they were all transferred in trust to a certain 
few persons as trustees to manage them in the interests 
of the several owners. The values of the respective prop- 
erties were ascertained, and the trustees issued trustees' 
certificates to the owners for their respective proportionate 
shares in the aggregate of the property turned over to the 
trustees. In some cases all the stock of the corporations 
was transferred to the trustees; in others only a majority 
of the shares; but whatever the extent of the interest, 
enough of it was turned over to the trustees to give them 
control of the several properties. There was one manage- 
ment, one policy, and one great combination, so far as pro- 
duction or marketing, price-making or profit-sharing, was 
concerned. Still the beneficial title to all these properties 
remained in their several owners. The different subsidiary 
corporations were still distinct. The combination was, 
strictly speaking, a " trust." The Standard Oil Trust was 
a marvelous success; at least, for those interested in it. 
It soon had imitators. The Cotton Oil Trust was estab- 
lished in 1883, and about a half dozen other genuine trusts 
of prominence were created. Among them w r as the Sugar 
Kefineries Co., better known as the Sugar Trust, which 
in 1891 was reorganized as a corporation and became 
known as The American Sugar Eefining Co. 

These arrangements — for they were arrangements rather 
than institutions — have passed away. They did not die " a- 
borning "; on the contrary, they were lusty, strong and 
powerful, hut nevertheless they were short-lived. The cry 
of" monopoly!" was raised. Courts, legislatures, and people 
all laid on them a more or less heavy hand. There seems to 
be little doubt that they were contrary to the unwritten 
common law which determines so many of our rights. 
Their existence was frequently declared as being against 



What is a Trust ? 23 

public policy. The masses thought that at every oppor- 
tunity the trusts, Ishmael-like, raised their hands against 
every man and oppressed and extorted. Ishmael-like, the 
trusts found every man's hand raised against them. Con- 
tracts in restraint of trade, contracts whose purpose is to 
kill all competition, contracts to raise prices arbitrarily or to 
limit production arbitrarily so that prices as a result will be 
raised, have from time immemorial been considered by our 
English common law, independently of statute, as against 
public policy, as therefore null and void between the 
parties to them, and as giving neither of the parties any 
rights thereunder or any remedy for injuries that he may 
sustain by the other's breach of the contract. This is a 
fair summary of the general state of the law on this point, 
although not infrequently judges have laid down the rule 
that only contracts unreasonably restraining trade or un- 
reasonably preventing competition were thus null and void 
and unenforceable. Popular fear of these combinations in 
many states has enacted, in recent years, special statutes 
making such contracts not only unenforceable and null and 
void between the parties, but making them criminal, and 
prescribing fines and imprisonment for those who are 
parties to them. Thus the condition of the trusts was 
more or less precarious. Even if they succeeded in the 
suits brought against them, they were almost sure to be 
harassed by suits; and litigation is expensive even for 
millionaires and trusts. To-day there is probably not a 
trust of any importance in existence. They are gone like 
the buffalo and the Indian. Perhaps they fled from fear 
like the buffalo, but more likely, like the Indian, they gave 
place to something that was (from the producer's stand- 
point) better. 

Not only were the genuine trusts of doubtful legality, 
they were not of perfect efficiency. They were combina- 



24 The Trusts 

tions which were liable to be disintegrated independently 
of decrees of dissolution made by courts in suits brought 
against them. They were temporary; they were tenta- 
tive. The great producers who had experienced the bene- 
fits of a concentration of effort, capital, ability, and experi- 
ence, saw a way of more permanently and more securely 
obtaining these benefits by means whose legality was less 
questionable; namely, by the great corporation, — the cor- 
poration which should buy out, merge, or consolidate all 
the others engaged in the industry, — the corporation of 
corporations. Sometimes the great merging corporation 
bought the stock of the several smaller corporations. The 
smaller corporation then continued in existence, but its 
stock was held not by individuals but by the great consoli- 
dating corporation. Yet since many states did not per- 
mit one corporation to buy the stock of another, more 
frequently the new corporation bought not the stock of 
the others but their property. The affairs of the little cor- 
porations were wound up. Instead of many concerns being 
conveyed in trust to be managed by trustees for the com- 
mon benefit of many owners who still had a beneficial title 
to their separate and distinct properties, we have in the 
case of a consolidated corporation one great concern, owned 
absolutely by its shareholders, which has bought up all the 
title, legal as well as equitable, of the several concerns 
which compose it. It may have as its shareholders the 
very same persons who owned the several distinct plants 
it has bought out; possibly their interests in the new cor- 
poration may be in exactly the same proportion that the 
value of their respective properties bore to the aggregate 
value of all the merged properties. Several of the trusts 
have reorganized as corporations, and the holders of the 
trustees' certificates have exchanged them for certificates 
of stock, dollar for dollar; still the general effect of legal 



What is a Trust ? 25 

decisions is that the new corporation is not in law a com- 
bination of separate interests; and that the parties who 
have sold their interests to the new corporation, even 
though they take stock in it, have not made a contract in 
restraint of trade. As a matter of fact they act together 
more harmoniously and unitedly than they did before; but 
in a corporation the individuals are no longer considered as 
acting; the corporation is said to act, — not its members. 
Most of the great industrial combinations of the day are 
corporations. Xone of them are trusts proper. We still 
call them " trusts," but they are a different means of ac- 
complishing the same purpose. A great corporation which 
buys out the properties of other corporations, even though 
it does so for the purpose of stopping competition which 
has been rife among them, is no more a trust, in the correct 
sense of the word, than a leech is a lancet. Years ago the 
leech was used to bleed sick patients; nowadays the in- 
strument for that purpose is the lancet. A few years ago 
the trust was one of the means of stopping undue competi- 
tion, of obtaining for the producer some of the benefits of 
combination, of practicing, in not a few cases, some of the 
extortions of centralized power, and of bleeding the com- 
munity. To-day the most common means employed for 
this end is the great corporation. 

The difference between the genuine trust and the con- 
solidated corporation is more than a difference of name. 
The one word is not strictly the synonym for the other. 
They are not the same thing. They may have many pur- 
poses in common, affect the same persons and interests, 
and effect similar results; but they are different in their 
creation and different in their rights and liabilities before 
the law. Economically and industrially they may be to a 
great extent the same thing; legally they are different. 
Decisions of the court applicable to the one have, at the 



26 The Trusts 

most, only a modified application to the other. Statutes 
that condemn the one do not necessarily concern the other. 
It is far more than a quibble to say that trusts proper 
differ from great consolidated corporations. The percep- 
tion of this fact is absolutely necessary to a right under- 
standing of the problem which industrial combinations in- 
volve, and to any successful attempt to solve it. 

It is, however, by no means to be inferred that all indus- 
trial combinations to-day are corporations, notwithstand- 
ing the popularity of that form of organization. Scarcely 
any of them are trusts in the strict legal sense. There are 
combinations innumerable — many of them gigantic and 
powerful — which are neither trusts proper nor corpora- 
tions. They are representatives of earlier types of com- 
binations. It has been conservatively estimated by care- 
ful students that there are at least five hundred pools and 
associations and combinations, not incorporated, whose 
field of operations is so extensive that from the standpoint 
of the consumer, who is apt to consider only their influ- 
ence on prices, they are perhaps as effective, obnoxious, and 
injurious as the greatest consolidated corporations may be- 
come. Besides these great ones an infinite number of 
small ones exist. There is hardly a city in which those 
engaged in some one or more branches of business are not 
combined or pooled or associated. Physicians frequently 
have their regularly prescribed professional fees; the drug- 
gists, wholesalers and retailers, have associations innumer- 
able that fix prices and terms of credit. This is equally 
true of the wholesalers in most lines and of many retailers. 

These combinations, associations, and pools differ, how- 
ever, from trusts proper and from great corporations not 
only Legally, but economically and industrially. Many of 
these combinations, big and little, and especially the little 
ones in their limited fields, present the evils of trusts in 



What is a Trust ? 27 

an aggravated manner in nearly every respect, and on the 
other hand offer few of the economic advantages to those 
interested directly in them, and present but few possibili- 
ties of good to the community. The underlying purpose 
of all these unincorporated pools and associations and com- 
binations — in fact, it may fairly be said, the almost sole 
purpose is to eliminate competition and raise prices. 
This is also the chief purpose of trusts and corpora- 
tions of all kinds. Legally, however, the combina- 
tions, to which reference is made, differ from the 
consolidated corporations in that the pools and associa- 
tions and combinations leave each concern which is a 
party to them, separate and distinct; and the combinations 
are based upon agreements express or implied, made by 
individuals, while the corporations are new entities, crea- 
tures of the State, subject to control and regulation by the 
State. They differ from the trusts proper in that the 
several owners of the properties in combinations still re- 
tain the legal as well as beneficial ownership. Economi- 
cally and industrially, " agreement " combinations differ 
from both the corporations and trusts proper in that there 
is still separate and distinct production and distribution. 
In many of them, very few, if any, of the economies of 
production and distribution, which result from combina- 
tion, are attempted. This is true of those whose only aim 
is price fixing. In these there is still the maintenance of 
a number of separate plants, the same old expenses of sales- 
men, of advertising, and of distribution over the whole 
field from each and every point of production. 

Sometimes, however, the associations go farther than 
merely to fix prices. They attempt to cut off some of these 
wastes occasioned by competition. Thus the enormous 
expense of soliciting a freight traffic which may, by such 
soliciting, be diverted from one railroad to another, but 



28 The Trusts 

which cannot be increased in aggregate amount, and which 
is sure to be eventually carried at a loss if the warfare of 
competition begins, caused railroads to form pools, and to 
agree on what amount of freight should be apportioned to 
the several lines constituting the pool, and to endeavor to 
send the freight in that way and in that proportion, and 
to pay each line its agreed share, even if the traffic did not 
follow the prescribed route. Eates were thus maintained 
and profits secured. The roads were able to make great 
savings in this way. The anthracite coal companies (for 
nearly the whole anthracite coal mining business is now 
in the control of seven railways which run through the ter- 
ritory where the mines are situated), to cite another ex- 
ample, have formed a pool, and each month they agree on 
selling prices, regulate and limit the production, deter- 
mine the proportion to be mined by each company, estab- 
lish or substantially determine prices to be maintained 
by the local dealers, and fix uniform rates of wages and 
regulations for mines. In these ways they make some 
savings, but the principal effect is to maintain prices. 
Other combinations save some of the expense of competi- 
tion by parcelling out the market so as to make it unneces- 
sary for each one to maintain a separate establishment 
therein. Armour, Swift, Hammond, and Morris, the " Big 
Four " of the Chicago meat packers, are popularly sup- 
posed to have an understanding whereby they do not inter- 
fere with each other in certain localities and markets. The 
price to be paid for cattle or charged for meat by all of 
them is fixed each day, although there is no known ex- 
press agreement and certainly no formal combination be- 
tween them. But their %w friendly agreement," their " un- 
derstanding between gentlemen," or whatever it be, is able 
to exercise a most effective control on the eat lie and meat 
industry of the whole continent. They conduct their 



What is a Trust ? 29 

business individually, but act in unison in many matters. 
Independent butchers have been practically annihilated. 

It is not known that either the anthracite coal pool or 
the "Big Four" in the meat business have any express 
agreement; but sometimes the understanding, or the 
resolutions of " combines," as to prices, production, and 
wages, are formulated in writing and made a written agree- 
ment. Not infrequently penalties are imposed, or an as- 
sessment upon each person is made and afterwards it is re- 
distributed to those who do not violate the agreement. 
The agreements of most of the wholesalers 5 associations as 
to minimum prices to retailers are written ones ; while 
the many combinations in the iron industry and among 
the manufacturers of steel rails have regularly imposed 
penalties, and the Standard Envelope Co. of Spring- 
field, Mass., was an example of a combination which as- 
sessed the members according to the amount of their pro- 
duction and afterwards re-distributed the fund among 
those who strictly adhered to the agreement. Whether 
the agreements of these various combinations are written 
or expressed, invariably every effort is made to keep them 
secret. The public never acquires knowledge concerning 
them until some member violates the agreement, and the 
fact comes to light in the revelation that is sure to result. 
For years the insurance companies have had pools or agree- 
ments as to premiums; and combinations existed among 
the manufacturers of steel rails, nails, chemical products, 
and steel beams, long before the public was aware of the 
fact. 

The three generic types of combinations, then, are : 
First, combinations, pools, and associations based simply 
upon agreements made by persons who still continue as 
individual owners, and w T hich generally affect prices, but 
sometimes affect output and methods and scope of business; 



30 The Trusts 

second, trusts proper, in which the owners of the several 
properties transfer their respective interests to several per- 
sons in trust to manage them as one property for the com- 
mon benefit of the several owners according to their pro- 
portionate interest; third, great corporations which absorb, 
amalgamate, and unify into one gigantic company various 
small concerns, — not infrequently nearly all of those en- 
gaged in one industry. Legally, each of these types of 
combination differ more or less in form and rights and 
liabilities from the others. Economically, the corpora- 
tions and trusts proper form one group — that in which 
there is a unity of management and control — while the 
several business concerns which form mere " agreement " 
combinations continue more or less distinct industrially as 
well as legally. The different types are mentioned above 
in their chronological order. Of " agreement " combina- 
tions we even now have many, but there is probably no 
existing trust in the proper sense of the word. The cor- 
poration — the large corporation that absorbs all the old 
concerns that were formerly competitors — is the latest 
phase of combination. It is the form that is to-day most 
popular with those seeking to combine, not only because 
of its industrial advantages and its financial conveniences, 
but chiefly because it is doubtful if it is illegal, while trusts 
and combinations are. It is the form that is attracting 
the attention of the public, because of its enormous size; 
and it is universally regarded as presenting grave dangers 
to industry, to society, and to liberty. 

Neither the great consolidated corporations nor the in- 
numerable combinations based on agreements are trusts — 
using that term with legal strictness — much as the people 
may so style them. Still as "a rose by another name may 
smell as sweet" these consolidated corporations and the 
pools, associations, and other combinations may, and in fact 



What is a Trust ? 31 

do, contain many elements that exist in the old but now 
discarded trusts. We name some things by their appear- 
ance, others by their purpose, others by their results, others 
because of their functions, still others because of similarity 
to things already named. Because of many similarities 
between the class of gigantic corporations which, we has r e 
described, and trusts proper, and pools or " agreement com- 
bines," the word " trust " has become popularly applied to 
all three forms. There is no use in questioning the pro- 
priety of this use of the word. The thing that is im- 
portant is to understand what is generally meant when 
the word is used, and also whether or not it is correctly 
used. /A trust, then, as the word is popularly used, may 
be said to be any consolidation or combination or aggrega- 
tion of a number of concerns in any particular line of busi- 
ness, which, prior to the combination, were naturally com- 
petitors. It is immaterial, in the popular sense of the 
word, whether the combination is the result of a mere 
agreement between independent owners, or is a corporation 
which absorbs them all, or is a union caused by a transfer 
in trust of several distinct properties. The essential point 
is the union, more or less formal, more or less permanent 
and close, of competitive producers, with the inevitable 
result of a cessation of competition between i\em u and usu- 
ally with the further result that in a territory of greater or 
less extent no actual competition exists. Such is the 
popular use of the word " trust." But if we would intelli- 
gently ascertain the evils, and especially if we would adopt 
proper remedies, it is absolutely necessary that we bear in 
mind the distinctions, economical and industrial as well - 
as legal, already made between the great corporations, 
trusts proper, and mere combinations based on agreements. 
The trusts proper we may dismiss from consideration, 
because they have, as it were, dismissed themselves out of 



32 The Trusts 

sight. The experience of the courts and prosecuting of- 
ficials with trusts proper was much like that occasioned by 
a certain border settler in Missouri who, during the Civil 
War, lived between the Confederate and the Union lines. 
When the former pushed forward to his home, and de- 
manded to know his sympathies, his reply invariably was, 
" Tm -a ' Secesh.' " When the Union lines were advanced, 
his statement of his position was always, cc Fm fer the 
Union" But once when the pickets of the two forces were 
both hot after him, his remarkable declaration was, " I 
ain't nothing and mighty little of that" When trusts were 
assailed in courts, and the case seemed about to go against 
them, the prosecuting officers always woke up to find that 
there was no trust. Before it could be caught and brought 
to justice " it was nothing." As a trust it had dissolved, — 
disintegrated, so to speak; but it always happened that the 
same persons, the same properties, and the same interests 
were soon seen in the form of a powerful corporation con- 
ducting the same enterprise. It was always a case of " the 
same old business at the same old stand;" no change, in 
reality, except a new sign. 

But pools, associations, and " combines," based upon 
agreements, like Thomas Jefferson, " still survive." From 
the way they continue it even seems as if we are to have 
them, like the poor, always with us. They present one 
phase of the problem of industrial combination, one that 
not only must be studied in connection Ajith the corporate 
phase, but also viewed separately; one that, perhaps, will 
require different treatment. It may be that any attempt 
to use the same remedy for the evils of corporate combina- 
tions and combinations based upon individual contracts or 
agreements, would be as foolisb as to treat in the same way 
a blister on the foot and water on the brain. 

The remedies heretofore tried for the evils of combina- 



What is a Trust ? 33 

tions have so far resulted in an increasing number of them 
being re-organized as corporations. The problem of in- 
dustrial combination, therefore, very frequently, if not 
usually, assumes the corporate phase. 

The problem, then, is largely the corporation problem, 
but it is more — it is the great corporation, the consolidated 
and consolidating corporation, engaged not in discharging 
quasi-public functions (for such combinations as railroad, 
traction, telegraph, water, and gas companies, etc., should 
be distinguished from purely industrial organizations like 
trusts), but in those industries like manufacturing and 
trading which, with a certain degree of success, can be car- 
ried on by private individuals. Furthermore, the problem 
of industrial organizations is one not only of size, but of 
how that size is obtained; not only of shape, but of what 
kind of a shadow that shape is going to throw over indus- 
try. It is more than the question whether or not cor- 
porations shall have, as the limit of capitalization, $1,000,- 
000 or $10,000,000 or $100,000,000. It is the question 
whether the corporation shall be allowed to buy out other 
corporations, to buy up all the productive means in any one 
line of business. It is a question whether, notwithstand- 
ing their gigantic size and enormous powers, these corpora- 
tions are still subject to economic laws, whether they are 
affected by competition, and, if so, to what extent. We 
ask not only whether Caesar has grown great, but " on 
what meat has this our Caesar fed that he has grown go 
great," and above all we want to know whether the mighty 
industrial Caesar is about to proclaim himself king and defy 
our rights. To apply a homely proverb, it is not merely 
a question whether we shall have big fish, but whether we 
shall let the big fish eat the little fish. It is well not to 
be deceived in this matter by mere size. A million dollars 
of capital combined in one industry may be very injurious 



34 The Trusts 

to the people; twenty millions may only secure the best 
and most economical productive means in another. The 
smaller sum may be sufficient to monopolize one branch of 
industry; the larger may not be able to control the major 
part of another industry. Thus, in 1899, there was a 
Federal Steel Co. owning many properties, and whose ag- 
gregate capitalization, including bonded indebtedness, was 
about $118,000,000; and there was being projected at 
that time the National Steel Co. to absorb about twenty 
plants, with a capital of $58,000,000; and further there 
was in existence the Eepublic Iron and Steel Co. with a 
capital of $55,000,000; and the Union Steel and Chain Co. 
was forming with a capital of $60,000,000; there were also 
the Bethlehem Steel Co., of Bethlehem, Pa., with a capital 
of $15,000,000, and the Cambria Steel Co., owning plants 
in five counties of Pennsylvania, capitalized at $10,000,000, 
besides several great corporations engaged in the iron busi- 
ness, and independent concerns of even more enormous 
capitalization engaged in the steel business. On the other 
hand it is unquestionable that many small industries have 
lately come completely under the control of corporations 
having capitalizations not a tenth or a hundredth part as 
large as those of some of these great steel-producing con- 
cerns. 



CHAPTEE III. 

THE MOTHER OF TRUSTS. 

When Topsy, in Uncle Tom's Cabin, was asked about 
her parentage, she answered: " I dunno, I 'specs I growed." 
We overlook the most important and the really basic and 
fundamental fact, in the investigation of trusts, if we fail to 
observe that, whatever else may have tended to bring them 
into being and to foster them after birth, at least some of 
them, like Topsy, " growed; " that they are largely an evo- 
lution in industrial progress, notwithstanding many of 
them may be mere excrescences. Whatever other things 
stimulate their growth, at least some of them are the chil- 
dren, the natural offspring, of the competition which, since 
man began to exchange with man, has unceasingly tended 
towards larger and larger organizations of industry — to- 
wards concentration, consolidation, combination, and co- 
operation. 

Two things are ever to be borne in mind concerning 
trusts: first, that they are gigantic industrial organizations; 
second, that they are unions of producers who were for- 
merly competitors. Whether or not they can wholly anni- 
hilate competition is the great question. Time alone can 
answer it; upon that answer depends the solution of the 
whole trust problem. But whether we view trusts as in-' 
dustrial organizations that are simply gigantic, or as com- 
binations that have absorbed or will absorb all the produc- 
tive agencies of any one industry and that have killed or 

35 



36 The Trusts 

will kill competition in that industry, it is unquestionable 
that their origin is traceable to competition. Competition 
is, in a sense, the mother of trusts, despite the fact that 
Mr. Havemeyer of the Sugar Trust, has, in a moment of 
bitterness, charged that the tariff is the maternal parent of 
this brood of ill-repute, and notwithstanding the further 
fact that many, who have noticed the succor given to trusts 
by railroad discrimination, patent laws, and corporate and 
other special privileges, have mistaken wet-nurses of trusts 
for the real mother. 

Competition between rival producers and distributers — 
plain, old-fashioned competition — tends to build up larger 
and larger enterprises, and ultimately to leave only one or, 
at most, a few great producers in the field. There are in- 
deed exceptions to this rule — counter tendencies — but the 
proposition in the main is correct and will rarely, if ever, 
be questioned. 

The purpose of factories and mills is to manufacture. 
The unceasing cry of the consumer is for cheaper commodi- 
ties. The community, it is true, has other interests than 
money-making, than obtaining goods at low prices, than 
getting as much as possible in return for a little. Social and 
political questions complicate themselves with economic 
problems. Still, in considering an economic situation like 
that occasioned by trusts, the first question to be answered 
is: " How can the most of those commodities which gratify 
our desires be produced by the least expenditure of en- 
ergy?" The question of distribution follows: " How can 
these things, when produced, be enjoyed by the persons 
who produced them, in proportion as they participated in 
the work of production?" In the final answer it will be 
found that the widest distribution means the largest pro- 
duction; the fullest production, in general, means the fair- 
est distribution. 



The Mother of Trusts ^>7 

It is the rule rather than the exception that trusts pro- 
duce more cheaply than the individual producers whom 
they displace, and therefore they can make the cost to the 
consumer less than their individual competitors can. The 
cost of an article to the consumer — its ordinary retail sell- 
ing price — depends not only upon the expense of making, 
but of marketing it. The great industrial combinations 
cheapen their product not only by lessening the cost of 
making but infinitely more by saving expenses in market- 
ing. 

The best established fact in industrial history is that 
concentration of capital in productive industry has ever 
meant increased efficiency in producing wealth, — a cheap- 
ening of products. It is concentrated wealth that has made 
possible our great factories, our great railroads, and all the 
great industrial agencies which have done so much to 
create and cheapen wealth and to give to us the comforts 
and conveniences of modern civilized life. Those nations 
that have encouraged the concentration of capital are the 
most prosperous; w^hile the greatest cheapening of products 
has been in the industries in which concentration is possi- 
ble. The exhaustive study into prices made a few years 
ago by the U. S. Senate Committee showed that within a 
generation the prices of the most important manufactured 
articles (those produced in industries in which combina- 
tion and centralization are practicable) had greatly de- 
creased, but the prices of the products of agriculture (in 
which capital cannot be advantageously concentrated) had 
increased. The specialization of labor, the introduction of 
machinery, the combination of effort, the concentration and ' 
consolidation of capital, have always in the past been un- 
mistakable signs of cheaper and more abundant production. 
These things came from the demand for cheaper commodi- 
ties. They remained, for a time, because they served the 



38 The Trusts 

community better. They remained till displaced by 
greater specialization, newer machinery, further concentra- 
tion, larger consolidations. 

The demand for lower prices first led to the division of 
labor. Men ceased to endeavor to supply all their wants, 
because they found that by each one doing that for which 
he was best fitted they could produce a greater aggregate 
and an increasing variety, and by exchange each could get 
more things for the same expenditure of energy, that is, 
get them cheaper. The extreme specialization that we see 
to-day in professional, as well as industrial life, is but a 
further division of labor; and the end is not yet. The 
purpose of it, the result of it, is to produce at a less cost, to 
render services more cheaply. The division of labor made 
possible the invention of machinery, which is only another 
answer to the demand for cheaper commodities. But the 
greater the division of labor the more necessary it becomes 
that men should co-operate, and the adoption of machinery 
usually necessitates the bringing together of a large num- 
ber of men into one enterprise. There are, it is true, ex- 
ceptions to this rule. Invention is sometimes a centrifugal 
force. It is not always centripetal. It occasionally decen- 
tralizes rather than centralizes. Thus not infrequently 
machinery is invented that makes but a part of some article 
and that cannot be used profitably by each producer of the 
article, and the result is that a new industry springs up for 
the manufacture of this part. This tends to detach from 
the old business wheA may be called a branch of it, and to 
make two business industries where formerly there was but 
one. But usually concent ration of capital is required to 
purchase new machinery that is invented, and the concen- 
tration of more capital is required to run it profitably. A 
little capital with machinery, like a little learning, "is a 
dangerous thing," but machinery with sufficient capital has 



The Mother of Trusts 39 

always meant cheaper production than was possible by the 
means that it displaced. The more complex and intricate 
that machinery is, the greater is the division and subdivi- 
sion of labor. Few men now make shoes, but thousands of 
men cut uppers, other thousands make heels for shoes, 
other thousands peg the soles. The greater the sub- 
division of labor, the more the necessity of co-operation and 
generally, although not always, the greater the necessity that 
a larger number of men be brought together in one enter- 
prise. This means greater concentration of capital, larger 
combination of industry. 

A more abundant and cheaper product has been the gen- 
eral result of all past industrial combination. This has 
been the uniform course of industrial history. Capital has 
combined because the demands of business seemed to neces- 
sitate it. It did not combine for the fun of the thing. It 
stayed combined as long as business by yielding profits made 
it advantageous so to do. Every labor-saving machine and 
every invention and improvement has required new capital, 
and the important inventions have required the capital of 
many persons in union ; but the product has been cheap- 
ened. It not only has cost less, but it has sold for less. 
From the moment in industrial history when men began to 
exchange their products, the movement towards concentra- 
tion of effort and combination of capital has been pro- 
gressive. The advance has been in a geometrical ratio. It 
is due to that instinct in human nature which lies at the 
foundation of economics which is the basic principle of 
exchange, namely, to get as much as possible in return for 
as little as possible. It is due to the fact that big producers 
are generally cheap producers. 

Not only does industrial history show that great business, 
organizations have been cheap producers, but in the very 
nature of things the cheap is the big, the cheapest is sure 



40 The Trusts 

eventually to become the biggest, and the biggest has a 
tendency to become and to continue the cheapest. Every 
one wants to get goods cheap. The person or organization 
of persons who will sell most cheaply will be the one patron- 
ized. He who sells most cheaply, sells the most; he 
naturally tends to become the biggest trader. He who can- 
not sell as cheaply as his competitors is bound, in time, to 
lose his trade and to be forced out of business, unless he 
discovers some new way of cheapening his wares. If he is 
forced out of business, the usual result is that the big com- 
petitor, who is generally the cheap seller, gets his trade 
and becomes a bigger competitor, with a bigger trade; and 
it is also generally true that by the failure of the weaker 
competitor, and his own consequent increase in trade, the 
large competitor becomes, to a certain degree, a still 
cheaper seller; for, with comparatively few exceptions, 
large undertakings can be conducted at a less cost, in pro- 
portion to the business transacted, than can small ones; 
and, further, the same percentage of profit from a large 
enterprise as from a small one may enable the owner of the 
large one to make enough to live in comfort and affluence, 
while the owner of the small one may obtain so little that 
he may, perhaps, lack life's necessities. The larger the 
business transacted, the smaller the percentage of profit 
necessary to its success. 

Competition is impossible without competitors; yet if 
there is a struggle of competition among a» given number, 
eventually one must prevail. But it will be asked: " Is it 
not a fact in industrial history that there are always new 
competitors springing up?" It is. New competitors will 
Bpring up; but, as a rule, the new competitors are larger 
competitors than those thai have been vanquished. If not 
so ai first, they soon become so. Competition generally is a 
process of constant; steady elimination. The winner in the 



The Mother of Trusts 41 

struggle will be he who gives the most for the money. This 
person will be the first to sell his product and, in so far 
as he can supply the entire demand, the others will have 
no market and must go out of business. Assuming that a 
small producer could by some labor-saving machine produce 
more cheaply, it would be only a short time before he would 
have his competitor's trade and become the large producer. 
But with the increased trade that would come as a result 
of the cheaper production by this new machinery, there 
would also come increased capital, — either accumulated 
profits, borrowed capital, or associated capital. It would 
come because it would be an absolute necessity to carry- 
ing on the increased trade; it would come also as a result of 
the business. As soon as the little producer, who got con- 
trol of the labor-saving machine or process, became the 
large producer, his position would unquestionably be 
stronger and his ability to produce cheaply would be in- 
creased. 

In the struggle of competition it is always the weakest 
that is trodden under foot, and it is generally the smallest 
that is the weakest. The process is continuous and cumu- 
lative. The little goes down before the large, and the large 
rises above and upon the little. This is not the result of 
trusts. It is the result of competition. It is not the result 
of trusts, but it is the cause of trusts. The underlying 
cause is that irresistible force that has never yet ceased and 
probably never will, — the demand for cheap production. 

Large production is usually cheap production. The 
large competitor has an advantage in the struggle. He is 
more apt to win than is his small and weak competitor. It 
is only an exemplification of nature's cruel law, the survival 
of the fittest; and of the pitiless economic law: " To him 
that hath shall be given, and from him that hath not shall 
be taken even that which he hath "; and of that dogma of 



4-2 The Trusts 

social despair, " The destruction of the poor is his poverty " 
Thank God that there are exceptions! Yet we can make 
no progress without recognizing the stubborn, though 
cruel, facts. 

Why are the largest producers usually the cheapest? Be- 
cause they can with their great capital obtain the most im- 
proved machinery, bring together the largest force, secure 
the best talent, spend the greatest sums in experimentation, 
utilize waste products, develop new markets, weather the 
storms of financial panics, offer the most favorable terms 
to purchasers, transact the largest business (and therefore 
be content with a smaller percentage of profit). As a re- 
sult of all these things they produce and profitably sell at a 
small amount per unit of product. The business enter- 
prises thus equipped are reasonably sure in the struggle of 
competition to overcome their weaker competitors. The 
natural law of political economy is for the large to become 
larger, because the large is usually the cheap. Our old 
time competitive system leads naturally up to huge indus- 
trial enterprises. Bigger and increasingly bigger, then, is 
the usual, normal, and natural tendency of industrial enter- 
prises. Its cause is the demand for the cheaper and the 
increasingly cheaper; its result is cheapness, which itself 
results in greater bigness, and this again causes further 
cheapness. Bigness, cheapness, greater bigness, further 
cheapness, — this has been, is now, and always will be the 
normal tendency and movement of economic and industrial 
progress. 

Competition, then, unrestrained and left to its natural 
course, tends finally, but tends normally, towards the ex- 
tinction of the small and weak, and towards the survival 
only of the large and strong. Great industrial organiza- 
t ions are tlie logical, inevitable, and ultimate results of com- 
petition. The formation of trusts, whose avowed purpose 



The Mother of Trusts 43 

is to save competitors from defeat in the war of competi- 
tion, as will be seen later, is very often only a short cut 
to this goal. It is the throwing up of the sponge in the 
early rounds of the fight before the knock-out blow comes, 
on condition that the competitor who is nearly " winded " 
shall receive a part of the gate money. 

It is a fact of common every-day knowledge that under 
our present condition of industry, as soon as one man is 
known to be engaged in a money-making business, great 
numbers of others engage in it, lured by the prospect of 
immense profits. There is a pell-mell rush to start in 
that business. Each aims to supply the whole market. 
Each introduces machines, processes, and methods of organ- 
ization designed to cheapen the product so as to be able to 
undersell his competitors. The lower the price, the greater 
is the necessity of a large output in order to reap an ade- 
quate aggregate profit. The larger the output, the more it 
is necessary to reduce the price in order to sell the product. 
The farther this proceeds the more aggravated the situation 
^ becomes. Competition is first active, then intense, then 
bitter, then destructive, finally self-destructive. In the 
end we are confronted with over-production and shut- 
downs; cut prices and sacrifice sales; depression, stagnation, 
and bankruptcy. When this excessive competition, like a 
fever, has run its full course those who have been able to 
survive, combine, formally or informally, tacitly or openly, 
to regulate the production, in order to make it com- 
mensurate with the demand and to obtain prices that will 
yield at least fair profit. Trusts, and the great corpora- 
tions commonly called trusts, are forms of combination for 
this purpose. " Low prices " is the popular cry. Trusts 
are the means used to comply with the request. Trusts 
are inevitable because the demand of the consuming public 
for lower prices is an insatiable appetite. It is sure to 



44 



The Trusts 



gnaw away profits, until a time comes when for a 
season, at least, it no longer pays some of the 
producers to produce. To avoid seemingly impending 
ruin they unite with their competitors, and a trust is 
formed to escape destruction in a warfare which others 
have largely urged on. Competitors fight for markets like 
dogs which the consumers set on with cries of " sic 'em." 
Not infrequently the contest ends for the combatants like 
the famous Kilkenny cat fight, when of the fighters " there 
was naught left but the tips of their tails and the bits 
of their nails." We do not say that all trusts are organized 
solely to escape the evils of undue competition, or that in 
every case profits have been wholly wiped out; but what- 
ever other motives may have existed, the chance to obtain 
the benefits of cheaper production, better regulation of out- 
put to demand, and fair prices, has been a most powerful 
motive in the formation of trusts. Many trusts have been 
formed for purposes of stock manipulation, but frequently 
the cause has been excessive competition. It has been, 
« Trust or Bust." 

There has always been a tendency for industrial organ- 
izations to increase in size. It is more marked to-day, 
because invention and discovery have enlarged the field of 
business, strengthened the competitors, and intensified the 
competition. The vastly improved means of travel, com- 
munication, and transportation tend to build up trusts, 
since they tend to increase competition. When the market 
was limited by the circle whose radius was the stage route, 
competition was bounded by thai circle. Outside of it, a 
maker, although his cos! of production was greater, could 
nevertheless find a market and could Bell his goods. The 
great expense of transportation by these primitive methods, 
when added to the cosl of production, often made it neces- 
sary for the cheap producer to charge in the relatively dis- 



The Mother of Trusts 45 

tant market a price in excess of that charged by some pro- 
ducer in that remote locality whose cost of actual produc- 
tion was much greater. But transportation has now be- 
come so much improved that each producer is the active 
competitor of all others. When shoes were made by hand 
and the stage was the means of transportation and com- 
munication, my local shoe cobbler could charge me much 
more than a cobbler in Syracuse, twenty-five miles away, 
because it would have cost me much to go to Syracuse to 
be fitted, and it would have been quite an expense to get 
the shoes from Syracuse, even if I did not have to go there 
to be fitted. To-day if my cobbler were to charge over- 
much, I could buy from many stores in my own city of 
Auburn, N. Y., shoes made at Lynn, Mass., or Brockton, 
Mass., or at many other places hundreds of miles away. 
Fifty years ago my local cobbler had hardly a competitor. 
To-day he competes with all the great shoe factories 
throughout the entire country. To-day, to tell the truth, 
my local cobbler is out of business, that is, he is no longer 
in business as a cobbler. The factory-made shoes were 
better and cheaper, and we took our trade from him. But 
the cobbler has now a place in the shoe factory where he 
makes more money than he did years ago when he pegged 
on his own last. The weak and struggling are no longer 
to any extent beyond the reach of competition. 

Although improved transportation has increased compe- 
tition, it has, nevertheless, expanded opportunities. The 
prize is proportionately great. Contracts for material of 
the value of millions are to-day not uncommon. Trans- 
actions involving the amount of a king's ransom are as fre- 
quent now as were those amounting to hundreds of dol- 
lars in years gone by. While I am writing this, the even- 
ing paper has been laid on my desk (April 11th, 1900), and 
I read that the New York Central Eailway has just given 



46 The Trusts 

to the Carnegie Co. a contract for 35,000 tons of steel rails, 
amounting in value to $1,190,000. The business needs 
and opportunities of the present day are many times 
greater than before the days of railroad transportation, 
telegraph and telephone communication, steam power and 
international travel. Business methods have to keep pace. 
Concentration of capital is inevitable; combination of effort 
is absolutely necessary. The competitors for these great 
trade opportunities must be immensely large and powerful. 
Great industrial corporations are the latest business mech- 
anisms for doing the great business of the world. They 
are formed because they can do the work. To-day America 
is reaching out for the foreign market. She is winning it. 
Americans built the Atbara bridge in Egypt. The Cramp 
Shipbuilding Co. is turning out cruisers for Eussia and also 
for Japan; their value is millions. Pittsburgh iron and steel 
manufacturers have taken stupendous contracts in China, 
Japan, Europe, Australia, and Africa. But every nation is 
a competitor for this foreign trade. The market for every 
producer is the world. Every man may strive to obtain it, 
but the victory is to the strong. Napoleon uttered a his- 
toric truth when he said : " God fights on the side of the 
strongest battalions/' In the mighty struggle for the 
world's industrial and commercial supremacy which has 
already begun, that nation will win whose industries are 
marshaled into mighty but perfectly organized phalanxes, 
capable of undertaking gigantic industrial tasks and ac- 
complishing them successfully. The little concerns must 
quail before the call to perform such commercial duties. 
Competition, here, gives the prize to the strong and large. 
Could any concern with less capital than one of the great 
industrial combinations, have taken and filled a six million 
dollar order for a railway in Russia, as has been done? 
Could any small concern, anything less than a trust, fill 



The Mother of Trusts 47 

this order? The great industrial organizations have come 
into being largely because they were necessary to do the 
enormous business that exists. Prof. J. W. Jenks of Cor- 
nell University, one of the most reliable and trustworthy 
sources of information as to trusts, is authority for the 
statement that the head of one of the greatest industrial 
combinations had assured him that his concern would 
bring in $500,000 in profits from their foreign trade. 
Pygmy establishments do not build up such trades. Fur- 
thermore, not only do these gigantic business corporations 
alone seem able to deal with the immense trade opportuni- 
ties when they are presented, not only are they the only 
competitors who can handle these big deals, but competi- 
tion prevents any but big concerns from building up such 
a foreign trade. It is manifest that it will not pay to 
attempt to work up an export trade unless it is a large 
one. It costs a great sum of money to introduce an article 
into a foreign market. Only a gigantic business enterprise 
can successfully develop such a market. 

Again, the contest for the markets of the world means 
the most intense competition between the wage-earners of 
the nations, that has ever been known. It is the hardest 
struggle into which American industry has ever entered. 
About every nation to which we export has cheaper labor, 
and in order that we may be able to produce cheaply enough 
to compete with producers employing this cheap labor, it 
is necessary that the most economical and labor-saving 
methods as well as machines be employed. Enormous capi- 
tal is necessary, and enormous capital, well organized, can 
overcome the competition of cheap labor. Take for in- 
stance the Standard Oil Co. and its foreign market. This 
great company has developed a foreign trade which brings 
into this country, each and every year, $60,000,000 in gold. 
Who will ultimately obtain the markets of the world? 



48 The Trusts 

What is it that will finally determine the question? Is it 
merely governmental control? Is it governmental do- 
minion? These may have their influence,, but in the long 
run the determining factor is the price. It is true that 
trade follows the flag, but the greater truth is that trade 
follows the price, and the flag is chiefly a protection to the 
trade. All the industrial countries of the globe, those of 
Europe, America, as well as Japan, are to-day competing 
for the markets of the world. The United States can win 
that trade and hold it, for manufactured goods, only by 
offering those goods at as low a price as their European 
and Asiatic competitors. Against the cheaper labor of for- 
eign competitors, the United States can obtain and hold the 
markets of the world for manufactured goods, by adopting 
labor-saving machinery and by availing themselves not only 
of every perfection of equipment and of process, but also 
of all the perfections of organization. This is possible 
only through centralization of industry and aggregation of 
capital. Our raw materials, although produced by indi- 
vidual efforts, will generally find a market; but it is most 
significant that of all our exports of manufactured goods, 
eighty per cent are being to-day produced by great indus- 
trial organizations, which are, in fact, known as trusts. 
In Europe, especially in England and Germany, we find, 
to-day, great associated capital in business enterprises. 
Those nations will beat us in the struggle of competition, 
unless we use every method and every mfcans that tend 
to cheapen our product without decreasing the wages of 
employees. The foreign market is absolutely necessary 
to American industry and prosperity. The productive 
capacity of the labor-saving implements and machinery 
of the United Staler more than equals to-day that of a 
population of 400,000,000 not using labor-saving devices. 
It is lliis absolute need of a foreign market in which to 



The Mother of Trusts 49 

dispose of our surplus products, and the intensity of the 
foreign competition, that have led to these perfections of 
industrial organizations from the standpoint of produc- 
tion, — the great business corporations of to-day. 

We will be most foolish if we fail to perceive clearly the 
cause and means of our industrial success. Out competi- 
tors, who jealously watch our every movement, have noticed 
how we succeed, and are attempting to fight us with the 
same instruments. The following from The Neiv York 
Herald of May 23,, 1900, is worthy of the most serious con- 
sideration by every person who is interested in the pros- 
perity of the American manufacturer, the American wage- 
earner, and every one whose success or welfare or prosperity 
is in any way connected with theirs: 

GERMAN INDUSTRIES UNDER TRUST CONTROL. 

SCARCELY AN IMPORTANT PRODUCT NOT REGULATED BY A 
COMBINATION. 

Syndicates and trusts are obtaining control of almost all 
branches of industry in Germany. 

In an article on industrial and commercial conditions in Ger- 
many, by Consul-General Frank H. Mason, prepared for the forth- 
coming volume of Relations of the United States, Mr. Mason 
says: 

" In the report of this series for 1897 the remark was made that 
as an incident and condition of Germany's perfect organization 
and industrial groicth, its leading productive industries had been 
syndicated to an extent probably unknown in any other country. 

" What was true then is still more true to-day. The two hun- 
dred trusts and syndicates which were in existence in Germany at 
the beginning of 1899 are increasing in number day by day, until 
there is scarcely a single important product of manufacture of 
which the output, price, and conditions of sale are not governed 
by a combination or understanding between producers. 

" One can scarcely open a German newspaper without finding a 
paragraph announcing a new combination of this kind, or an 



50 The Trusts 

article pointing to the recent notable multiplication of syndicated 
industries in England and the United States as an example of 
what Germany should do for self -protection." 

Not only has the tendency to centralization, consolida- 
tion, and combination been caused in part by the increase 
in the intensity of competition due to the invention of 
labor-saving, cheap-producing machinery and to improved 
means of transportation, travel, and communication, it has 
been furthered by other inventions which have increased 
competitive forces by enabling men to exercise manage- 
ment over greater organizations and supervision over wider 
fields. The talent for management has developed with 
each increase in the size of organizations, and it has been 
aided and fostered by labor-saving inventions and discover- 
ies. The stenographer and typewriter, the telephone (local 
and long-distance), the telegraph, rapid transit, and 
myriads of other facilities, have enormously multiplied 
the capacity of managers to dispatch business, and have 
enabled them to manage and supervise more and greater 
things. The modern means for transacting business 
have made possible the consolidation of a multitude and 
a magnitude of business interests under one management, 
which fifty years ago would have been physically impossi- 
ble. Competition is fiercer to-day because each competitor 
has appliances and methods that give to him increased 
capacity and power and ability. Would these means ever 
have been invented or discovered if they were not to be 
employed for their natural ends? 

Competition, — which by the way is nothing but the 
reflex of thai popular demand for cheaper goods, which 
is as ceaseless and as irresistible as the force of gravitation, 
— has dictated not only the size of industrial enterprises, 
the degree of centralization, ami the extent of combination 
of effort, but the manner and form. For a long time all 



The Mother of Trusts 51 

enterprises were under individual ownership, but when 
greater concentration became necessary, it could be secured 
only by a union of capital and effort and skill. For 
a century the partnership form of co-operation prevailed. 
Two or more men joined together; but there remained 
individual liability on the part of each for all the debts 
and liabilities of the partnership, regardless as to which 
person, in fact, made the contract or incurred the liability. 
Each partner was liable for the whole amount of the debts 
of the partnership, and however small a portion of his 
capital might have been actually invested in the business, 
his entire fortune, whether in that business or in another, 
was liable to be taken from him in payment of the debts of 
the firm. This rule of law as to the liability of partners 
naturally repressed and restricted the formation of part- 
nerships, and prevented the concentration of wealth and 
combination of effort. The natural limitations of human 
endeavor, and the impossibility for many men to work 
together harmoniously and advantageously in joint man- 
agement and control, were a further restriction upon and 
an impediment to the success of partnerships. The old 
proverb, " Too many cooks spoil the broth," has had 
innumerable exemplifications in partnership enterprises. 
Soon it became recognized that some relief was necessary, 
that some method of association must be provided for by 
law that would enable men to invest a portion of their 
wealth in business enterprises, with their liability limited 
accordingly. Statutes as to special partnerships were 
framed, but such statutes had to be followed and observed 
with such technical care that they never afforded a satis- 
factory relief, and never made possible that concentration 
of capital which the advance in industrial opportunities 
made necessary. Some scheme whereby men could invest 
portions of their capital in business enterprises, whereby 



52 The Trusts 

they could put their spare money in an enterprise which 
they themselves should not be obliged to manage or con- 
trol, and with only a limited liability for the debts of the 
organization, became necessary. Men do not like to put 
all their eggs in one basket. Many of them want to dis- 
tribute their money in different enterprises in order to 
lessen the risk. Where many co-operate it is necessary that 
a few manage and direct; but to induce people to put 
their money under the management and direction of a 
few, you must, at least, assure them that only to a limited 
extent will they be liable for debts which are not of their 
own creation. The partnership form of organization could 
not bring together enough capital. Its successor was the 
corporation. It was the multiplication of inventions, it 
was the wide expansion of the market, it was the enlarge- 
ment of the industrial world, that made this greater con- 
centration of capital necessary and that gave rise to the 
modern business corporation. In the struggle of competi- 
tion, the partnership with its limited capital, unlimited 
liability, and cumbersome methods, could not do business 
as cheaply as the corporation. This is what has led to the 
growth of corporations. The trusts of to-day are gigantic 
corporations, — corporations of corporations. They may 
possibly be more than this, but this much, at least, they 
are. There may be, in fact, are, various causes for their 
formation; but this much, at least, is certain: one cause, 
one great cause, of their formation is their economic su- 
periority. They possess the power of cheaper and more 
abundant production. In proportion as they exercise the 
consequent power of lowering prices, is the likelihood — yes, 
the possibility of their continuance. 

Competition, — the old-fashioned competition that weeds 
out the weak and inefficient, — gave birth, then, first, to 
the partnership, afterwards to the corporation, and in our 



The Mother of Trusts 53 

day to the gigantic corporation. The story of economic 
progress, from the dawn of industry until the present mo- 
ment, is the record of the concentration of effort and the 
combination of productive capital. Co-operation, concen- 
' tration, consolidation, and combination, — these are the 
results of competition. 



CHAPTEE IV. 

THE WASTES OF COMPETITION. 

The most noticeable fact in the industrial history of the 
times is the complete lack of anything like efficient organi- 
zation of industry at large. Our advance in general business 
organization has not, until within recent years, kept pace with 
our wonderful inventions and discoveries. Our productive 
agencies have been mightily improved, but the marshaling 
of our industrial forces has not received the study that it 
deserves. Trusts are in some instances, at least, attempts at 
better organization. The evils of the system, which such 
trusts combat, are the evils of unregulated competition. 
Professor John Graham Brooks in his address at the 
Chicago Trust Conference declared that one of the most 
successful business men in the East had said to him: ' 7 If 
people generally knew how stupidly and wastefully much 
of the large business is carried on we should become ob- 
jects of ridicule"; and yet the trusts, which are designed 
to correct these faults and to save these wastes, are the 
objects, to-day, of popular suspicion, reproach, and hatred. 
The Chairman of the Interstate Commerce Commission is 
quoted as saying, in substance, that if the? worst enemies of 
the railroads had charge of the great means of transporta- 
tion, they would never dare to do the reckless and indecent 
things which the managers of the railroads themselves 
have done in their attempts at competition. Professor 
Brooks is also the authority for the statement that in the 
business of insurance, which has been considered a marvel 

54 



The Wastes of Competition 55 

of organization, there is such waste by reason of unregu- 
lated competition that one of the foremost men in the 
insurance business said to him: " It would not be safe to 
have it known how extravagantly things are managed, or 
to what sorry shifts we are driven "; and that when Pro- 
fessor Brooks asked another prominent insurance man if 
this criticism were just, he replied: " Oh, competition has 
got us now where the only dress we ought to wear is the 
cap and bells." Trusts, when organized, as they often are, 
merely as unions of producers to secure the advantages of 
such a union in producing, are attempts to regulate busi- 
ness with some degree of wisdom and judgment; but trust 
organizers are almost invariably denounced as foes to in- 
dustry and to society. 

The wastefulness of unrestrained competition is the 
great obstacle in the way of cheap production. It is ruin- 
ous to the competitors; it is disastrous even to the com- 
munity. It not only absolutely prevents cheap production; 
it necessitates high prices. What are the incidents to-day 
of competition? They are known to every one; personal 
observation and experience make us all cognizant of them: 
— duplication and multiplication of effort to obtain a single 
result, several salesmen striving to secure a single order, 
selling agencies uselessly multiplied and selling expenses 
necessarily increased, sales without a profit in order to 
prevent rivals from selling, sales upon terms of credit 
that are in themselves a mere dissipation of capital, cut 
prices and bankrupt sales, — these are the methods of mod- 
^ ern business life. Competition is said to be the life of trade; 
but competition, as it is practiced, is, in fact, frequently 
u war to the knife and knife to the hilt." It is business 
committing suicide. Can men be blamed, — are they, in 
fact, to be condemned or criticised, — for endeavoring to 
stop this senseless, useless, and debasing warfare, this fatu- 



56 The Trusts 

ous self-destruction? Justice Gray of the New York Court 
of Appeals voiced a growing sentiment when he said in 
Leslie vs. Lorillard (110 N. Y. 519): " I do not think that 
competition is invariably a public benefit; for it may be 
carried on to such a degree as to become a general evil." 

From the standpoint of the producer, it is to be borne in 
mind that at least three-fourths of the men engaged in 
business, according to the reports of the commercial agen- 
cies, fail at some period of their business careers. Special 
statistics for manufacturing, milling, and mining, — the in- 
dustries in which trusts are most frequently formed, — are 
not at hand; but these business enterprises are known to be 
risky and speculative. When successfully conducted they 
are apt to be very profitable; in fact, they are alluring 
to the capitalist. But they are always hazardous; even those, 
which for a long time are successful, frequently become 
embarrassed and fail; and the extent of the loss seems usu^ 
ally to be a much greater portion of the capital invested 
in them than in the case of failures of mercantile enter- 
prises. 

The interest of the community, however, is to be con- 
sidered from the standpoint of the consumers rather than 
that of the producers, for if we consider any one industry, 
the consumers vastly outnumber the producers. Is the 
old-fashioned competition between many struggling com- 
petitors, — competition unrestrained and uncontrolled even 
by voluntary action, — is this always the best thing for the 
consumers? Can the trusts by any possibility be of benefit 
to them? The answer is thai the waste of competition is 
so great that it doe- not permit the cheapest production; 

that while it wipes out profits, it <loes not necessarily lower 
prices; that our preseni industrial system, with its lack 
of organization and control, and its waste of energy, is 
extravagant and costly. 



The Wastes of Competition 57 

There was once a miserly man who thought his horse ate 
too much. Each day, therefore, he gave him a smaller and 
smaller quantity of oats and hay, until finally he gave him 
none at all. " Just at the moment when I had gotten him 
trained to live on nothing," he afterwards said, " he died" 

The great army of consumers is ever clamoring for lower 
prices. " The profit of the producer and of the distributer 
is too high." " They eat too much." By competition 
the profit is gradually lessened. The producer and the 
distributer are allowed to bite off less and less. The con- 
sumer rejoices. Then the profit soon vanishes entirely. 
Just as the demand for low prices and the competition 
that caters to it, get the producer or the distributer to 
the point of producing or distributing without a profit, 
he goes into bankruptcy. Just at the moment when he 
has gotten trained to live on nothing, he dies, as a busi- 
ness man; he vanishes as a competitive force. Here is 
the consumer's victory; but where is the consumer's gain? 
The competition, — at least a part of it, — has died with the 
competitor who fell a victim. Is not the consumer hoist 
with his own petard? 

If we turn from the parable to the judicial dictum, we 
find the same truth declared. In Kellogg vs. Larkin, 3 
Pinney 150, the court said: 

" I apprehend that it is not true that competition is the life of 
trade. On the contrary, that maxim is one of the least reliable 
of the host we may pick up in every market-place. It is in fact 
the shibboleth of mere gambling speculation, and is hardly entitled 
to take rank as an axiom in the jurisprudence of this country. 
I believe universal observation will attest that in the last quarter 
of a century competition in trade has caused more individual dis- 
tress than the want of competition. Indeed, by reducing prices 
below or raising them above value (as the nature of the trade per- 
mitted) competition has done more to monopolize trade, or to 
secure exclusive advantages in it, than has been done by contract. 
Rivalry in trade will destroy itself, and rival tradesmen seek to 



58 The Trusts 

remove each other, rarely resorting to contract unless they find 
it the cheapest mode of putting an end to the strife. ,, 

As a matter of fact the consumer is frequently injured 
by excessive competition. He is benefited, however, by 
everything that reduces the cost of the article to the pro- 
ducer, unless the reduction in cost comes from the degrada- 
tion of labor; for this makes it possible, at least, for the 
consumer to get it at a reduced price; and further, the 
industrial history of the world proves that reduced cost 
always ends and results in reduced prices. There is no posi- 
tive evidence that this latter fact will be changed under 
the system of industry in which trusts predominate. But 
of prices we will treat later. 

Is there any fixed point beyond which there is no econ- 
omy in consolidation? The wastes of competition mani- 
fest themselves in production as well as in distribution. 
Is there any natural limit to the working of the general 
rule that large organizations produce more cheaply than 
small ones? Much depends on what is meant by produc- 
tion. Prof. Henry C. Adams of the University of Michi- 
gan, in an address before the Chicago Trust Conference 
in September, 1899, argued that there was such a natural 
limit. Let us quote him: 

" It is common to say that increase in the size of a manu- 
facturing plant permits the production of commodities at less 
cost than would otherwise be the case. There is undoubtedly 
some truth in this statement. The development of machinery 
lias gone hand in hand with the growth of factories, and as a re- 
sult the product is furnished at a cheapened rate. But there is a 
limit to the application of this rule. Every manufacturing in- 
dustry, considered from the point of view of production, has at 
any particular time a size which may be regarded as its normal 
size of maximum efficiency. This normal size of maximum effi- 
ciency is determined by the extent to which division of labor and 
the use of machinery can he applied. To increase such an in- 
dustry by one-half would not result in a decrease of the cost of 



The Wastes of Competition 59 

manufacture, for it would occasion a less effective application of 
the principle of division of labor. While, therefore, it is true that 
the concentration of capital and labor under a single direction is 
followed by economy up to a certain point, it is not true that com- 
bination and concentration beyond that point tend to reduce the 
cost of production. He who accepts this statement of the case 
must conclude that manufacturing combinations (I say nothing 
of other forms) contribute nothing to the reduction of the cost 
of manufacture beyond what would be contributed should each 
of the industries continue its independent competitive existence. 
This is a curt answer to a profound question, but it is believed to 
rest upon sound analysis and to lead to the conclusion that the 
motive for a trust organization of manufacturing industries is not 
found in a desire to benefit the public by the reduction of cost." 

It must always be borne in mind, as pointed out in an 
earlier chapter, that the limits of managing capacity, and 
of profitable production, are being constantly expanded by 
such inventions and discoveries as the typewriter, tele- 
phone, cash-registers, and by improved means of transpor- 
tation and communication. Talent and skill in business 
management are being constantly fostered and developed 
by and with the constant increase in the size of business 
organizations. Any attempt to set arbitrary limits to this 
size, — any statement that up to a certain point and no 
further, an organization is a cheap producing agency, — is 
to declare that progress has come to a standstill, that in- 
ventive genius is dead, that the capacity of human de- 
velopment is exhausted. There may be numerous reasons 
for limiting the size of our great business organizations, 
but the basis of those reasons does not lie in the possibility 
of their becoming so unwieldy that they will not be 
as cheap producers as smaller organizations. In so 
far as this productive capacity is concerned, the proper 
policy is to remove all special privileges, prevent all 
unfair discriminations, clear away all the obstacles 
to the free working of economic forces, and let the 



60 The Trusts 

laws of trade work themselves out. Then it will be 
found that the unwieldy trust will go to pieces. Mere 
size will, in itself, no more permit the trust to win 
than it availed Goliath in his contest with David. With- 
out arbitrary laws capriciously limiting the size of busi- 
ness organizations, these organizations will, if trade is left 
free and unhampered, as surely find the point of maximum 
efficiency for their capital, as water is certain to find its 
level. On the other hand, all the legislative fiats in the 
world that declare, " Thus large you may become and 
no larger," w r ill be as futile as were the words of King 
Canute to the rising tides, " Thus far shalt thou come 
and no further." 

If by production, Prof. Adams means simply the making 
of the article, he may possibly be correct. But if that 
be his meaning it matters little whether or not he is 
correct. The cost of goods to the consumer depends upon 
the cost of marketing as well as making. 

We have mentioned in an earlier part of this book how 
the demand for cheap production has always necessitated 
the adoption of new machinery and the best processes, and 
how it has always necessitated concentration of capital and 
combination of effort, and how, as a rule, the large, well- 
equipped establishments, being the cheap-producing estab- 
lishments, have defeated the small and weak establish- 
ments in the struggle of competition. This same demand 
for lower prices is not contented with the savings that 
inventive power has made possible. It demands all the 
savings that can come from better organization. Not- 
withstanding all the outcry against trusts, the people 
clamor for cheaper and cheaper goods. This demand can 
be acceded to by producers only by availing themselves 
of all the economies of shipping from convenient centers 
and of large production at the cheapest places, and of 



The Wastes of Competition 61 

the economies of administration and distribution that 
come from a perfected organization, and of the economies 
that can be suggested by those of special skill whose tal- 
ents can be obtained only by the expenditure of great 
sums of money. Just as the demand for low prices com- 
pels the adoption of machinery, it compels the forma- 
tion of larger industrial organizations. There is prob- 
ably not a single one of the great trusts that can- 
not effect enormous savings in the making and market- 
ing of their product; that cannot furnish it to the 
consumer at a less cost (cost of raw material being as- 
sumed to be the same) than prevailed when the same article 
was made and marketed by each of the concerns embraced 
in the trust. We admit that the chief saving of trusts is 
in improved methods of distributing its products; but this 
saving is enormous. The intensity of competition has un- 
doubtedly made the expense of marketing one's product, 
not infrequently greater than the cost of making the prod- 
uct. 

What are the economies which trusts make possible? 
What are the industrial advantages of this form of organi- 
zation? Briefly speaking, they are the savings of the 
wastes of competition. They are the benefits of organiza- 
tion as contrasted with the evils of an entire lack of 
organization. 

First. Trusts are able to buy in large quantities and 
therefore cheaply. Perhaps it will be said: " This is no 
advantage to the public, for if they buy cheaply, the seller 
must part with his goods at a low price. This is a bene-, 
fit to the trust purchaser, but it certainly is no benefit to 
the seller and it may be of no advantage to the com- 
munity/' But it is an advantage to the community in 
just so far as the cheapening springs from the ability to 
perform a very great task or to do a very large work with 



62 The Trusts 

an expenditure of energy proportionately less than that 
required for a little task or a small undertaking. The 
unceasing attempt to procure cheaper goods is a struggle 
for progress whenever it aims to accomplish its purposes 
by causing production or distribution with less labor. If 
large quantities of goods can be bought and sold and 
shipped and delivered at a lower proportionate expense 
than small quantities, then the lowering of the price is a 
benefit, because it represents a cheapening of the cost. It 
is a positive, actual, permanent benefit to the community, 
which a mere cut of prices that did not result from a 
cheapening of the cost of production might not be. It 
would hardly seem necessary to argue the proposition that 
the ability to buy in large quantities and therefore cheaply 
(if followed by a lower selling price) is a benefit to the 
community. But trusts are to-day fiercely assailed because 
of the very fact that, it is claimed, they tend to lessen 
the price of raw materials. This statement will be dis- 
cussed more fully in a subsequent chapter and the facts 
will be considered. But let us for a moment consider the 
logical outcome of the argument of those who contend 
that the lessening of cost due to the purchase in large 
quantities, because it is apparently so great an injury to 
those who sell raw materials, is an element of injury to 
the people, and one of the evils of trusts. If it is a bad 
thing that prices be lowered because of purchases in large 
quantities, — if directly or indirectly trusts for this rea- 
son should be prohibited or made impossible, — then why 
not enact and declare that henceforth and forever, pur- 
chases should be in smaller quantities than are allowed 
to-day? Why not forbid all wholesaling? Why not make 
the retailers sell only by the smallest unit of measure? 
The absurdity of such a course shows the equal folly of 



The Wastes of Competition 63 

attempting to limit large purchases by trusts because they 
result in a cheaper price to them. 

Second. A second economic advantage of trusts is their 
ability to sell in large quantities, with a smaller selling 
force and at a smaller percentage of expense. Conse- 
quently, they can, if they will, sell more cheaply. The 
question whether they do, in fact, sell at a lower price, — 
the vital question of trusts, — will be considered in fol- 
lowing chapters. But there are many who seeing all the 
hardship that is caused by the displacement of labor, by 
the discharge of large numbers of commercial travelers 
whose services are no longer needed, by the elimination of 
a great number of jobbers and middlemen, and seeing all 
the suffering and inconvenience and financial loss sus- 
tained by them, consider this ability of trusts to sell with 
a smaller selling force as a great objection to trusts and 
one of its worst evils. The matter can be referred to here 
only briefly; fuller consideration will come later. But 
if it is folly to dispense with the now useless selling force, 
and with the jobbers and middlemen who are no longer 
needed; if it is to the advantage of the community that 
these people be kept at work although the same work 
could be done without them, why would it not be wise 
to insist that every wholesaler and every manufacturer and 
every jobber should double his force of commercial trav- 
elers and should establish twice as many selling agencies, 
and why should not a larger number of men be drafted, 
if necessary, and compelled to go to work as retailers? The 
answer is that useless labor and toil are expenses and bur- 
dens not alone to those who primarily pay for them, but 
eventually to all the community. We will never know- 
ingly expend twice the energy that is necessary to do a 
given amount of work. We will not pay for that which 



64 The Trusts 

we can get for nothing; we will not part with our prop- 
erty for that which we know is of no value to us. 

Third. Another important economic advantage of trusts 
is that the several plants of the organization being situated 
in different sections of the country, the demand of any 
one locality can be supplied from a plant in that vicinity, 
thus saving enormous expense in transportation. 

Fourth. The necessity of a very large portion of the ad- 
vertising, which is now so heavy an expense of business, 
can be saved by trusts. 

Eeverting to the last three points, let us consider a 
few facts of daily observation with reference to the amount 
of the expense incurred in the employment of commercial 
travelers, and in advertising, and in transportation. Tens 
of thousands of commercial travelers are employed, who are 
paid large salaries, besides their expenses in traveling and 
social treating. Their work is not so much to introduce 
new goods or to educate people in taste or style, as to 
solicit trade, — to entice it away from competitors and to 
their employers. Millions of dollars are spent annually in 
this country in advertising. Some of it is useful informa- 
tion, but the most of it is merely to call the consumers' 
attention to the business of one of several competitors, — to 
influence him to trade there instead of elsewhere. But 
what of the expense of transportation? The market to-day 
is universal; men sell their products in all sections of the 
country, in all quarters of the globe. Tastly improved 
means of transportation have wiped out old market limits. 
Freight rates have been marvelously cheapened; still 
freight is one of the heavy expenses connected with mer- 
cantile business. It is needlessly and wastefully so, be- 
cause distribution is not made from appropriate or con- 
venient centers. The enormous gross freight earnings of 
our railroads, to which must be added the vast sums re- 



The Wastes of Competition 65 

ceived by owners of steamboats, canal boats, and stages, 
show that the cost of what we eat and wear and consume 
is greatly increased by the expense of transportation. 
Much of this is needless. Trusts save a great deal of this 
waste. With mills in all sections of the country, the local 
demand can usually be supplied from local centers of dis- 
tribution. The factory of New England need not send its 
products to the far West or to the South, to compete with 
the same products made there. " Coals need not be carried 
from Newcastle to Carlisle." 

Fifth. There can be the greatest specialization in manu- 
facturing. A plant which is peculiarly well adapted for the 
production of a particular brand or style or quality, can 
be used for that purpose. The very best special machinery 
can be profitably employed in it, and all the hands em- 
ployed can specialize in this branch of the business. The 
best equipped plants may be run to their full capacity. 
Others which are needed, may, by means of the enormous 
capital possessed by the trust, be put in good working 
order. Those which are not needed may be closed. Many 
are continuously lamenting this closing up of industries, 
this throwing men out of employment, this blighting of the 
business prospects of flourishing towns and villages; but 
if the trust does not arbitrarily restrict the output, and if 
it is able with fewer plants and less men to produce all 
that is needed, why should it continue the extravagant and 
costly production that is incidental to running many 
small plants? If the closing of these unneeded factories is 
so great an injury, why not reap the full measure of benefit 
of the opposite policy, and insist that the number of fac- 
tories in existence be, at least, doubled? 

This shutting-down of factories and mills by trusts is 
condemned as one of the greatest evils of the new system, 
but it should not be forgotten that under the competitive 



66 The Trusts 

system, mills and factories and stores are constantly being 
closed, because unable to compete successfully. 

The real evil of this practice of trusts in closing factories 
is not the closing of the factory so much as it is the prac- 
tice of sometimes paying these people for periods of inac- 
tivity; and the more common practice of buying the plant 
in order to overcome its competition when it is known that 
it cannot be a cheap and profitable producer. 

Sixth. A great advantage that the trust has in doing 
business, springs from the very fact that its plants are not 
all located in one place. No catastrophe can be conceived 
which will interrupt the entire business or completely 
suspend its operations. If a flood or a fire compels one 
plant to shut down, the business may be continued in 
other plants. 

Seventh. While individual concerns w T hich engage in the 
bitter struggle of competition not infrequently become so 
exhausted and their resources so depleted that they are 
unable to test or adopt new inventions or processes, 
the abundant capital which trusts are able to enlist en- 
ables them to carry on constant experimentation and to 
adopt the latest and most improved methods and means. 
It may be urged that if they have sole possession of a field 
of industry, — if they have a monopoly, — they will have 
no incentive to experiment with new methods or adopt 
new machines. But they have no legal monopoly, no ex- 
clusive legal right, and while their strength and their 
established trade give to them an enormous advan- 
tage over their competitors, they have no exclus- 
ive power to sell, except so long as they can sell most 
cheaply, and this they can do only when they can 
produce and distribute most cheaply. Despite all the 
incentive that the intensity of competition gives to sepa- 
rate individual producers to adopt the most improved ma- 



The Wastes of Competition 67 

chinery and the best processes, so as to survive in the 
tremendous struggle of competition, it is a fact that the 
inadequacy of their capital, the very bankruptcy occasioned 
by their competitive struggle, has frequently prevented 
their doing that which alone could keep them alive. When 
the International Paper Co. was formed, it was most bit- 
terly assailed by the newspapers of the country. In an 
address presented by the American Newspaper Publishers' 
Association to the Anglo-American Joint High Commis- 
sioners, and signed by the owners of 157 newspapers, an 
arraignment of this trust was made. Whatever may be said 
as to the sufficiency of this charge against trusts, it is, at 
least, evidence froin persons in no way favorable to trusts, 
and demonstrates our proposition that competitive pro- 
ducers are often unable when acting alone to adopt im- 
proved methods and machinery, which they could if con- 
solidated. 

In reading the paragraphs of this address, which are 
quoted below, it should be borne in mind that the paper 
trust embraced companies which were fairly representative 
of the trade. While it was a combination of the weak and 
struggling, it must have been a union of companies of 
financial standing nearly equal to the average of all those 
engaged in the business, for it took in at first twenty-five 
and afterwards thirty of the pulp and paper mills of the 
country, having an aggregate production of about eighty 
per cent of the total product of news paper. The para- 
graphs in the protest of the American Newspaper Pub- 
lishers' Association, which are pregnant with significance, 
are the following, the italics being our own: 

"Excessive and improper prices were paid for many mills that 
were located on exhausted water-courses and that were tributary 
to denuded timber tracts; for mills that at periods of the year 
have an insufficient supply of water or are under water; for mills 



68 The Trusts 

that are inferior and worthless in machinery, equipment, and con- 
struction; for mills that must pay excessive rental for water 
power; for mills that do not own or control woodlands; for mills 
that have neither pulp-grinding attachments nor sulphite aux- 
iliaries. 

" Five of the paper mills obtain their power at a total annual 
cost of $196,000. Two others are run by steam, which makes 
competition impossible, and five others have insufficient power. 
Four owned no woodlands and ten of the mills had no sulphite 
auxiliaries. Ninety-eight paper-making machines were comprised 
in the plant of these mills, but only forty-eight of the machines 
were of recent date or desirable pattern. Not one of the mills in 
all the combination possessed all of the six essentials of the 
cheapest and most successful manufacture" 

It is not only true that in the struggle of competition, 
the independent producers have been unable to afford the 
latest and most improved appliances and methods, but, 
when combined, they not only could afford them, but did, 
in fact, test and adopt them. One frequently reads or 
hears denials of this statement. It is therefore proper to 
quote so eminent and disinterested an authority as Ernst 
Von Halle, who in his book, Trusts or Industrial Combina- 
tions in the United States, has said: 

"We find continual efforts at further advance, by the applica- 
tion of the newest machinery and of new labour-saving processes, 
and this as rapidly as is consistent with the amortization of the 
means of production on hand. For example, the American Sugar 
Refining Company has built a new refinery, furnished with the 
newest technical improvements, to serve only* as a safeguard in 
the case of a suddenly increased demand, or of stoppages in other 
factories. The Cotton Oil Company has a great experimental sta- 
tion of its own. The Whiskey Trust has introduced quite a num- 
ber of inventions to improve the quality of its product. 

" By all new inventions the whole business is benefited at the 
same time, while the jrreat number of plants gives a chance to 
make local experiments with new processes of manufacture. 

" In this direction, none of the adversaries have been able suc- 
cessfully to accuse the trusts of negligence; on the contrary, 



The Wastes of Competition 69 

since the beginning, complaints have been based upon the very 
allegation that through the introduction of labour-saving pro- 
cesses and of machinery of the newest construction, and through 
the closing of superfluous factories, numerous workingmen have 
lost their occupation, — an objection which surely is not a new 
one, nor peculiar to this form of industrial progress. Only in com- 
binations secure against all kinds of competition — i.e., legal 
monopolies — can there ever arise the danger of a standstill in 
methods of production." 

A point that by no means should be overlooked is the 
ability of a great trust to give up one of its local plants 
for purposes of experimentation, whereas if that plant were 
the sole plant of any company, business could not be sus- 
pended for that purpose. Another point of vital im- 
portance is that as soon as the practicability of any process 
or machine has been demonstrated, as soon as it has been 
found to be labor-saving and cheap-producing, it will not 
be adopted by one of many producers, but will be placed 
by the trust in all the plants which make up the aggrega- 
tion. Thus the benefit of any invention or process will be 
more speedily and more generally realized. 

Eighth. The enormous capital of trusts enables them to 
spend large sums of money in the development and ex- 
tension of trade in foreign countries. It is necessary here 
only to make mention of this great economic advantage, 
inasmuch as it has been discussed more fully in the pre- 
vious chapter on the " Mother of Trusts," and will also be 
considered in the chapter on " Trusts and Expansion." 

Ninth. One of the great economic advantages of trusts 
is their conservative influence in the matter of credits. 
Trusts tend to lessen cost by diminishing bad debts. Mr. ' 
Bryan has criticised this conservatism in granting credits. 
He has, in fact, declared it to be one of the evils of trusts, 
and has represented the retailer as being the victim of a 
somewhat merciless wholesaler. He has said: " The trust 



JO The Trusts 

can not only fix the price of what it sells, but it can fix the 
terms upon which it sells. You can pay cash, or if there 
is a discount, it is just so much discount, and you have to 
trust to the manager's generosity as to what is fair, when 
he is on the one side and you on the other." Without for 
the present considering the point as to whether the trust 
can actually and arbitrarily fix prices or even terms of sale, 
we believe that it will be generally conceded that one of 
the evils of the present competitive system is that which 
Mr. Bryan has chosen to refer to as " generosity " in the 
extension of credit. The cause of nine-tenths of the 
bankruptcies and failures is the abuse of credit. It is not 
only an evil to the man who is forced to give the credit 
in order to obtain the trade, but in the intensity of com- 
petition among sellers there is such an undue extension of 
credit, that not infrequently goods are practically forced 
on the retailer. He is virtually compelled against his own 
better judgment to over-stock. The inevitable result is a 
large percentage of bad debts, — a percentage which is kept 
down only by the maintenance by the large business 
houses of expensive collection departments. The consumer 
is the Atlas who bears upon his shoulders the whole com- 
mercial world. The sum total of bad debts and uncollecti- 
ble accounts, as well as the expenses which the extension 
of credit necessitates, — the interest, the cost of book- 
keeping and of maintaining collection departments, — all 
fall upon him. When competition is restricted, the eager- 
ness to sell is limited to sales to those whose solvency is 
unquestioned. 

Tenth. The greatesl advantage of trusts is the regula- 
tion of production. Handling a very large portion of the 
product of an industry, its managers can obtain approxi- 
mately accurate information as to the market and its needs, 
and as to tlie demand tor the article which they make. AVith 



The Wastes of Competition 71 

a full knowledge of the capacity of their own factories and 
of those of their competitors, if any, they can adjust their 
output to correspond with the demand. They can avoid 
the necessity of carrying large stocks; thereby they can 
save much of the expense of insurance, storage, interest, 
and shop-wear. When we try to conceive the vast total 
amount of these expenses, we are almost bewildered by 
the greatness of the figures; but, great as they are, a large 
portion of the expense would be saved to the world by the 
methods of trusts. But the greatest benefit is not the sav- 
ing of the insurance, the storage, the interest, or the shop- 
wear, but that which comes from the lessening of the evil 
of over-production, — an evil, the crushing pressure of which 
is daily being felt more and more by all the industrial na- 
tions of the world. There is not an industry in which 
machinery has been perfected which is not being endan- 
gered by over-production. The machines which the skill 
and the cunning of men have invented, are becoming 
Frankensteins that now threaten to crush us. The eighty 
millions of Americans now have a productive capacity that 
is equal to the consumptive power of one hundred and 
sixty millions of Americans; and it should be borne in 
mind that the Americans are the greatest consumers of 
the world. It has been estimated that the machines in 
this country will enable its inhabitants to produce as much 
as four hundred millions of people could produce without 
labor-saving machines. There is not a single industry in 
w r hich the evil of over-production does not exist to-day. 
Those in which it was first most acutely felt were the first 
to form trusts. Prior to the formation of the Standard 
Oil Company, the market was so glutted that not infre- 
quently the oil was allowed to run to waste in creeks and 
brooks. The whisky industry has long been able to supply 
more than the demand. Soon after the close of the civil 



72 The Trusts 

war, the productive capacity of American distilleries was 
three times that of the consumptive power of the country, 
and prices were so depressed that occasionally alcohol was 
offered on the market at less then the amount of the tax. 
In 1870, to correct the evils of over-production, nearly all 
of the distilleries north of the Ohio Eiver entered into 
an agreement to produce only to the extent of two-fifths 
of their capacity. In 1888, the export trade having greatly 
fallen off (because the foreign production had increased), 
the capacity of the distilleries was four times as great as 
the domestic consumption. In 1881, the uniform price 
was below the cost of production as it had been several 
times previous thereto, and a pool was formed for the 
express purpose of exporting whisky even at a loss so as 
to turn the product into ready money. The loss was ap- 
portioned among the different distilleries, which were reg- 
ularly assessed for the purpose. When the first whisky 
trust was formed, it closed sixty-eight out of eighty distil- 
leries, but with the remaining twelve it was able to furnish 
the same output as before and soon to increase it largely. 
It should also be borne in mind that the capacity of the 
plants owned by the sugar trust is four times the domestic 
demand; and that the cotton-oil trust was able, as soon 
as formed, to close many of its presses. It is always more 
satisfactory to cite an example which has come under per- 
sonal observation. In the city of Auburn, N. Y., within 
the past week (May 24, 1900), there has lately occurred a 
shut-down in a shoe-factory which is the principal one 
in the town and one of the leading ones in the country. 
The statement of the company shows that this is but one 
of the thousands of similar cases which can be attributed 
to over-production. Here are some significant paragraphs 
from it: 



The Wastes of Competition 73 

"Statistics show that the shoe factories of this country, when 
running full, can produce as many shoes in seven months as we 
consume in a year. The general business of the country has been 
exceptionally good the past year or more, with the result that the 
factories have run full, and there has been a large over-produc- 
tion of boots and shoes, leaving large stocks in the hands of both 
jobbers and retailers. These conditions make it very difficult to 
obtain orders ahead, as the dealers, knowing the conditions and 
understanding fully that prices of leather are governed by sup- 
ply and demand, feel that prices may be less, later on, and so are 
holding off and trying to dispose of stocks on hand, which seems 
wise for them to do. Dealers, willing to buy at all, are demand- 
ing and receiving concessions from manufacturers. Prices of 
leather so far remain fairly firm, so there is quite a risk for the 
manufacturer to buy leather at present prices and cut into goods 
for fall delivery when prices by that time may be much less. 

" We finished cutting spring orders some time ago, and have 
since been running on fall orders, the bills for which are dated 
fall, to be paid at dates agreed upon after that time. Reports 
show that most shoe factories during the past six weeks have 
been running either one- quarter to one-half their capacity, or are 
completely shut down. We have always taken great pride in giv- 
ing our help steady work, and often make sacrifices to do so, 
which they know nothing of. While we were considering the 
advisability, yesterday, of ordering more stock to keep running, 
the report came to the office that some of the employes were dis- 
satisfied, and we concluded if they did not appreciate the condi- 
tions of trade and what we were trying to do for them, we would 
close down for a time, as other shoe manufacturers are doing, 
particularly as what fall orders We have booked are from one- 
quarter to half the size only that the same parties have usually 
given." 

The evils of over-production are not measured by the 
fall in price which the manufacturer has to endure, but 
more by the enormous loss that falls upon the laborer who 
is thrown out of employment, and even more by the result- 
ing stagnation that pervades all branches of industry and 
which causes financial panics and business depression, — 
those periods, so trying to the souls of men, which during 



74 The Trusts 

the last half century have been occurring with increasing 
frequency in America. Unless these evils can be combated 
and overthrown, unless our production can be regulated 
and restricted to our effective, healthful demand, or unless 
outlets can be found for our surplus products, instead of 
being a prosperous country and a happy and contented 
people, we will become a most wretched and miserable na- 
tion, and discontent, envy, and sedition will be rife. 

It would be grossly unfair, however, to refer to the power 
of trusts to regulate production or to correct the evils of 
over-production by the development of foreign markets, 
without conceding that the power to prevent over-produc- 
tion implies, to a great degree, at least, the power arbi- 
trarily to restrict production, at least temporarily, and 
thereby to raise prices unduly. This is but one phase of 
the great monopolistic element, which is more or less inci- 
dental, if not more or less inherent in trusts. But this 
point will be considered later. We have this year, in the 
spring of 1900, had either a most striking example Qf the 
abuse of this power of trusts over production, or else con- 
clusive proof that even trusts that have succeeded in getting 
control of an entire industry, may be hardly more able 
to foresee the demands of the future than small separate 
concerns. The American Steel and Wire Co., within two 
months after a statement by the head of the company to 
the effect that the active demand, which, for many months, 
had characterized the market, was certain to continue, sud- 
denly closed about a dozen of its plants and threw out of 
employment four thousand of its employees. This may 
have been done arbitrarily for the purpose of depressing 
the value oft he stock of the company. If it was an actual 
necessity, it is hardly possible to believe that the managers 
of the company possess perfect business foresight. The 
closing of these works would hardly seem, however, to have 



The Wastes of Competition 75 

been for the purpose of so limiting production as to create 
an artificial demand in excess of supply, for the purpose of 
raising prices, because with the closing down of the works 
mentioned, the company did very greatly reduce its prices 
for the purpose of marketing its surplus stock. 

Eleventh. Trusts work great economies by their ability 
to utilize waste, and to turn it into valuable by-products. 
The Standard Oil Co. in this way has built up enormous 
industries subsidiary to its main business of refining 
petroleum. Ernst Von Halle states that there are more 
than three hundred by-products in the domain of this com- 
pany, which have yielded most valuable materials to numer- 
ous other industries. Thirty of these are commercial 
products in which there are large dealings. 

Twelfth. We have alluded to the conservative power in 
business which trusts exercise by restricting credits. 
They present another financial advantage. They 
broaden the field of investment. It would be useless to 
deny that under the loose corporation laws that exist in 
most of our states, under the lax methods of inspection and 
control, and because of the shameless dishonesty which so 
often characterizes corporate management in this country, 
investment in stocks and particularly in " industrial " 
stocks, is hazardous. Yet when an aroused public con- 
science, when an enlightened commercial policy, shall de- 
mand that corporate methods be honest, that corporate 
management shall be faithful, that the acts and deeds of 
corporations in so far as they affect the public shall lc 
public, and when fraud and misrepresentation in connection 
with corporate enterprises are punished as certainly and as 
severely as when they occur in individual dealings, and 
when those who are entrusted with the properties of great 
corporations are held liable as trustees thereof, — then, not 
only will the masses, who now deposit their accumulated 



j6 The Trusts 

gains in savings banks, receiving the minimum of interest, 
find fields of investment which will be safe and secure and 
profitable, but business will receive the impetus that comes 
from new capital, and industry will have a further stimulus. 

Thirteenth. Even under the present lax conditions of our 
corporate methods, and notwithstanding the slight incen- 
tive to invest in trust stocks, trusts are able to float their 
bonds at a lower rate of interest than that at which their 
constituent companies were able to borrow money before 
the consolidation. They are also able to obtain, by the 
sale of their stock, an ample working capital. In this way, 
again, they are a conservative force. Their bonds run for 
a long period of years and mature at a fixed date. This 
saves them from that great danger of independent manu- 
facture, namely, the calling in by banks, in times of busi- 
ness depression, of their loans to them. The honestly man- 
aged and conservatively financed trust ought to have a less 
hazardous and perilous career than most manufacturing 
establishments in the past have had. 

Fourteenth. Trusts, being relieved from the bitter strug- 
gles of competition, are able to raise and maintain the stand- 
ard of quality. It must be conceded that the ability to 
raise it, implies the ability to lower it. This is one of the 
many phases of the monopolistic element which it is 
charged that trusts possess. But if, for the purpose of ar- 
gument, we admit that trusts may demand to a great extent 
whatever price they wish to impose, w*e are then obliged 
to concede that some of the pressure that causes adultera- 
tion is largely removed; for, on this theory, whatever they 
add to the cost of production in furnishing a pure article, 
they can recoup in the price. It is, at least, pleasant to as- 
certain, as the result of investigation, that the articles 
which are made by the trusts that have been longest in 
business have been greatly improved in quality. Notwith- 



The Wastes of Competition JJ 

standing some charges to the contrary, which have been 
made by Mr. Henry D. Lloyd in his book entitled Wealth 
Against Commonwealth, it is the general experience of 
those who, for the last thirty years, have used kerosene, 
that to-day its quality is better than ever before; that there 
is less danger of explosion, and that there is now scarcely a 
perceptible disagreeable odor. Ernst Von Halle asserts 
that the whiskey trust has done much to improve the qual- 
ity of its product; and consumers throughout the country, 
although they may denounce the sugar trust, will almost 
universally admit that the quality of the article has been 
bettered. 

Fifteenth. By no means least of the benefits of trusts, — 
in fact, one of the greatest advantages of this system as 
compared with that which prevails under competition, is 
the opportunity for comparative accounting and compara- 
tive administration. This is of immense benefit, not only 
to the trust, but to the consuming public. How often 
when one struggling competitor sees another apparently 
succeeding and prospering, he says to himself, " I wonder 
how he does it? What is the secret of his success?" It 
is evident to him that his successful rival has secured some 
advantages, but the latter, if a shrewd business man, keeps 
them to himself. If all the competitors were banded to- 
gether in a trust they would compare notes, and if one was 
found to possess a better machine than the others, it would 
be procured by all. If another was found to have a cheaper 
process than the others, it would be adopted by the whole 
trust. If the organization of a third was considered more 
perfect than that of the others, all the factories and plants 
forming the trust would have an organization modelled 
after it. All the members of the trust would be the gain- 
ers, but those chiefly benefited would be the public. 

So much for the economic advantages of trusts. So 



78 The Trusts 

much for the savings of the enormous wastes of competi- 
tion, which trusts can bring about. But what of the 
economic disadvantages of trusts? Perhaps the most im- 
portant of those which suggest themselves as inherent in 
these organizations is the loss of individual initiative and a 
possible smothering of individual incentive. The trust is 
largely impersonal. It loses much of the good-will that its 
constituent members formerly had. There are many who 
fear that it will not be a beneficial form of industrial or- 
ganization, because they think its officers and servants will 
not work so faithfully and energetically for the proprietors 
who live far away and with whom they never come in con- 
tact, as they would for a master under whose eye they 
worked. There is an even more widespread belief that 
trusts are crushing out individuality, that they tend to 
close the door of opportunity, and that inasmuch as fewer 
men can be heads of enterprises and independent proprie- 
tors, there will be no incentive to them to do their best. 
It is felt that since the hope of securing an interest as 
owner of a plant is gone, ambition has gone with it. It is 
claimed that, inasmuch as from the manager down to the 
cheapest laborer, all of the persons who are actively indenti- 
fied with the work of the trust are employees, therefore 
there is no longer the same spirit animating them. We 
believe these dangers have been greatly magnified. Con- 
ceding that comparatively few men will now obtain a pro- 
prietary interest, we believe that the prizes of business life 
are larger than they ever were, and business opportunities 
are greater. The larger and the more perfect the organ- 
ization, the greater the incentive and the surer the promo- 
tion of the capable. Take, for instance, great railways, our 
largest and most perfect organizations. Is there not there 
an ample stimulus to energy; is there not an abundance of 
opportunities to act as incentive for the ambitious? Are 



The Wastes of Competition 79 

there not examples innumerable of men who have entered 
in the lower grades, and have worked themselves up to 
high offices and to positions even in the directorates? The 
modern trusts offer innumerable opportunities for advance- 
ment and the greatest of prizes for which to struggle. As 
in all our previous industrial history, they will be won by 
those who are most competent. " He will bear the palm 
who deserves it." We have had, as the result of the organ- 
ization of the great Carnegie Company, a marked instance 
of the possibilities still open to young men. Charles 
Schwab was chosen president of this gigantic corporation. 
He is a young man who has worked his way up. The secret 
of his success has not been "pull," but "push." This 
attainment of this high place is not the result of accident, 
but of faithful working during business hours and of 
special study and extra work when away from the mill and 
factory. This instance is, indeed, exceptional, but still 
there need be no fear that ambition will be stifled as long as 
there is opportunity for advancement. Trusts are a form 
of organization that in its very nature is a scheme of or- 
derly and regular and graded promotion of the efficient. 
A century's experience with business under corporate con- 
ditions should dispel all fears that the servants and em- 
ployees and officers of those who adopt this form of busi- 
ness organization will prove indifferent to the interests of 
their employers. There are no employees more faithful 
than those of the business corporations which have been so 
common during the last thirty years. There is no reason 
to fear that the servants, officers, and employees of the 
greater corporations known as trusts will be less devoted to 
the interests of their employers. 

A second evil of trusts is one that is financial, rather than 
economic; incidental and temporary, rather than inherent 
and permanent. It is the likelihood of rash and wild 



80 The Trusts 

speculation in trust stocks, tending to produce a feverish 
excitement in business. But this is an evil which can be 
corrected by the exercise of control over corporations. 

There are many other evils that have, in the past, re- 
sulted from trusts. They are the occasional instances of 
extortionate prices, of unduly restricted production, of 
diminished wages, of depressed prices for raw materials. 
Besides these there is the possible deterioration of the 
quality of the product, and the danger of political corrup- 
tion and domination. All of these are phases of the great 
question of monopoly as an element of trusts, which will be 
considered in subsequent chapters. 

To sum up, if we consider the two elements of 
making and marketing which together fix the price of an 
article to the consumer, there can be no question 
as to the wonderful economy of the trust form of indus- 
try. Some of the largest manufacturers in their 
respective lines in the United States have been 
quoted as saying that the consumer often pays to the 
retailer twice what would be the cost of the article and a 
fair profit to the manufacturer. The great savings of the 
trust, which we have enumerated, make this statement seem 
not at all improbable. It is not difficult to believe that if 
that system could be perfected, many commodities could 
be sold for about one-half their present market price. Are 
instances of the savings by consolidation necessary? If so, 
suppose we take at first that much-cited, rfiuch-condemned 
trust, the earliest, and the strongest, — the Standard Oil 
Company, — the trust that has been criticised so much but 
which has never yet claimed to be the " Slandered " Oil 
Company. Can the Standard Oil Company produce more 
cheaply, or are its profits due wholly to depressing the price 
of crude oil, or to railroad discriminations in its favor, or 
to new inventions which would have been adopted had 



The Wastes of Competition 81 

Hi ere remained a great number of small competitors and 
which would have produced the same savings when used 
by the many? How does the Standard Oil Company tend 
in any way to really reduce the cost of production? 

When this trust was being investigated before the House 
Committee on Manufactures, in the summer of 1888, the 
following statement was made by its counsel, in his argu- 
ment: 

"The Standard Oil Trust offers to prove by various witnesses, 
including Messrs. Flagler and Rockefeller, that the disastrous 
condition of the refining business and the numerous failures of 
refiners prior to 1875 arose from imperfect methods of refining, 
want of co-operation among refiners, the prevalence of specula- 
tive methods in the purchase and sale of both crude and refined 
petroleum, sudden and great reductions in prices of crude, and 
excessive rates of freight; that these disasters led to co-operation 
and association among the refiners, and that such association and 
co-operation, resulting eventually in the Standard Oil Trust, have 
enabled the refiners so co-operating to reduce the price of petro- 
leum products and thus benefit the public to a very marked de- 
gree and that this has been accomplished: 

"1. By cheapening transportation, both local and to seaboard, 
through perfecting and extending the pipe-line system, by con- 
structing and supplying cars with which oil can be shipped in 
bulk at less cost than in packages, and the cost of packages also 
be saved; by building tanks for the storage of oil in bulk; by 
purchasing and perfecting terminal facilities for receiving, 
handling, and re-shipping oils; by purchasing or building steam- 
tugs and lighters for seaboard or river service, and by building 
wharves, docks, and ware-houses for home and foreign shipments. 

"2. That by uniting the knowledge, experience, and skill, and 
by building manufactories on a more perfect and extensive scale, 
with approved machinery and appliances, they have been enabled . 
to and do manufacture a better quality of illuminating oil at less 
cost, the actual cost of manufacturing having been thereby re- 
duced about 66 per cent. 

" 3. That by the same methods, the cost of manufacture in bar- 
rels, tin cans, and wooden cases has been reduced from 50 to 60 
per cent. 



32 



The Trusts 



"4. That as a result of these savings in cost, the price of re- 
fined oils has been reduced, since co-operation began, about 9 cents 
per gallon, after making allowance for reduction in the price of 
crude oil, amounting to a saving to the public of about $100,- 
000,000 per annum." 

The amount of some of the other of these savings in this 
year, 1900, may be easily estimated. In 1872 it cost $1.50 
to transport a barrel of oil from the wells to New York. 
To-day it costs only about fifty cents. The annual produc- 
tion of the company is about 35,000,000 barrels. In 1872 
the barrels cost $2.35 each; to-day they cost not over $1.25. 
Of course, by no means all of the oil is transported in bar- 
rels, but the saving to the company each year is many mil- 
lions. The expense of the tin cans used by the company 
has been cut in two; thereby they save many millions each 
year. It has also reduced the cost of the wooden kegs 
used by it, so that it annually saves about $1,500,000. In 
the manufacture of many of its by-products, such as 
naphtha, lubricating oil, paraffine, wax, etc., the trust is 
compelled to use large quantities of sulphuric acid. It 
makes its own sulphuric acid now, and instead of being 
obliged to pay for it one and one-fourth cents per pound, 
it is able to produce it for eight cents a hundred pounds. 
As shown in the chapter on Prices and Potential Competi- 
tion, the decrease in the price of kerosene between 1872- 
1898 is so great that when applied to the annual consump- 
tion for the latter year the saving to the* public js about 
$160,000,000. 

But perhaps more conclusive than the statements of 
what the Standard Oil Company would prove, or than the 
figures just mentioned, is the inference that every one must 
draw from the enormous dividends paid by the concern. 
In 1872 none of the oil refiners were making money. About 
that time the Standard Oil Companies of Ohio and Penn- 



The Wastes of Competition 83 

sylvania formed an alliance with two other large refineries, 
the Pratt Co. and the Atlantic Kefining Co. In 1882 the 
Standard Oil Trust was formed. In 1887, five years later, 
its capital was $90,000,000, largely water, but its profits, 
according to the report of a New York legislative commit- 
tee appointed to investigate, were $20,000,000. Could the 
trust have made such profits if there were not economies in 
making and marketing occasioned by the consolidation, in- 
asmuch as the separate companies in keen competition had 
none of them prospered? It should also be noted that the 
price of oil had decreased, — not only the price of crude but 
also refined, — and the difference per gallon between the 
cost of crude and refined, i.e., the cost of refining and trans- 
porting to the seaboard, was 14.32 cents in 1872, when the 
alliance was formed; and in 1887, the year the profits 
were $20,000,000, the difference was 5.16 cents. Can this 
mean anything else than cheaper production? If so, we 
must concede to the Standard Oil Trust what has never yet 
been conceded, that they have lowered prices even more 
than the decrease in cost of production. To-day (April 26, 
1900) the Standard Oil Company is capitalized for about 
$100,000,000. It is still largely water, notwithstanding 
the fact that water and oil are not supposed to mingle, and 
yet so great are its profits, caused by the savings of the 
consolidation, that its stock is worth 590 in the open mar- 
ket. Yet oil has gone down still further in price. In 
1897 the difference between crude and refined (the cost of 
refining and transporting to seaboard) was 4.04. Is not 
this cumulative evidence that the consolidation can pro- 
duce cheaply, while warring competitors could not? In the 
three years, 1896, 1897, 1898, the Standard Oil Company's 
dividends aggregated ninety-four per cent of its capitaliza- 
tion or $91,415,000. The market value of its stock to-day 
is between $500,000,000 and $600,000,000. 



84 The Trusts 

Let us now look at the savings in cost of service, by con- 
solidation of telegraph companies. Prior to 1866, our tele- 
graphic service was done through a number of small local 
companies. To send a message across the country it was 
necessary for it to pass through the hands of not less than 
a half dozen companies. In 1866 they were all consoli- 
dated into the Western Union Telegraph Co. At this 
point, inasmuch as we are now engaged simply in studying 
the question whether or not consolidation gives cheaper 
cost of service or production, it is perhaps unnecessary to 
give particular study to prices or rates, but it is helpful for 
us to do so in order to see if profits come from reduced cost 
or higher charges. George Gunton has collected some 
valuable statistics in an article written by him for The 
Political Science Quarterly for September, 1888, but in- 
cluded by him in a book issued this year (1900). We quote 
from it: 

"rates for sending ten WORDS FROM NEW YORK: 

1866 . 18S8 

To Chicago $2.20 $0.40 

" St. Louis 2.55 .40 

" St. Paul 2.25 .50 

" Cincinnati 1.99 .40 

" New Orleans 3.25 .00 

" Galveston 5.50 .75 

" Minneapolis 2.10 .60 

" Buffalo 75 .25 

" Washington! 1). C 75* .25 

" San Francisco 7.45 1.00 

" Oregon 10.20 1.00 

" State of Washington 12.00 1.00 

Moreover, in 1868, when this country sent only 6,404,595 mes- 
sages, it cost the company, on an average. (13.4 cents per message; 
and, in order to make a profit on the capital invest ed, the average 
price charged to the community was $1,047 per message, leaving 
41.3 cents profit per message. In 1887, when the company sent 



The Wastes of Competition 85 

47,394,530 messages, the average cost per message was 23 cents; 
and the average toll to the community was reduced to 30.4 cents 
per message, leaving only 7.4 cents profit per message. It will thus 
be seen that during the twenty years of this monopoly the average 
cost of messages to the community, to all points, has been reduced 
74.3 cents per message, or over 70 per cent; and that the profits 
have been reduced 33 cents per message. In other words, the total 
cost of the service to the community to-day is 10.9 cents per mes- 
sage less than the profits alone were before the organization of 
this company." 

The cheapening of the cost of transportation as a result 
of combination and consolidation is equally worthy of at- 
tention. In his address before the Chicago Conference on 
Trusts in September, 1899, Mr. H. T. Newcomb, of the 
U. S. Census Office, said: 

" The decline in railway charges in the United States has been 
continuous and extensive. The average rate per ton of freight 
carried one mile, measured in gold, has declined from nearly two 
cents in 1867 to less than eight mills in 1898, the last year cov- 
ered by the reports of the statistician to the Interstate Commerce 
Commission. The price of wheat at the port of New York dur- 
ing 1867 would pay for the transportation of but 2.84 bushels of 
wheat, from Chicago to New York at the rates of that year; in 
1897 the price, though considerably lower than in 1867, would 
pay for moving six bushels. In other words, the decline in the 
railway rate from Chicago to New York was twice as great as 
the decline in the price of wheat. The decline in passenger rates 
from 1871 to 1898 amounts apparently to 25 per cent; but, unlike 
that in freight rates, is not susceptible of satisfactory statistical 
presentation. The substantial identity of the service necessary 
to permit the use of the statistical method, has not, however, been 
preserved. The dollar that purchases transportation in a modern 
train, provided with automatic couplers and air brakes, traversing 
at sixty miles per hour, a track composed of Bessemer steel rails 
weighing 100 pounds to the yard, and guarded by block signaling 
apparatus, purchases vastly more than did the dollar paid for 
personal transportation a few decades ago, even though the dis- 
tance traversed be but little greater at present. The public has 
preferred to have improved accommodations and better service 



86 The Trusts 

rather than very much lower charges, and, as usual in America, 
has had its way. The same rise in the standard of living that has 
given the American farmer his top-buggy, his piano in the parlor, 
his Sunday suit, and Brussels carpet, has given him the luxurious 
coaches and well-ballasted roadbeds, the safety and the speed of 
modern passenger-service. 

But has the competition of rival routes produced these reduc- 
tions in rates and improvements in the quality of service? I think 
not. 

Such competition has caused numerous extravagant expenses; 
it has made railway business unnecessarily costly, and some one 
must have paid the bills. Let us examine some of these expenses, 
though it is not easy to secure authentic statistics, and those 
available serve to suggest only the possible aggregates. The In- 
terstate Commerce Commission has reported that nine roads paid 
out an aggregate sum of more than one million dollars in a single 
year as commissions for securing competitive passenger business, 
and it is known that as much as $20.70 has been paid to secure a 
single second-class passenger from this city to San Francisco. The 
multitude of outside agencies and traveling agents maintained 
solely for the purpose of securing business for their respective 
lines that might otherwise traverse those of their competitors in- 
volves an expenditure so great, even during periods of comparative 
harmony, that it has been deemed necessary to restrict their num- 
ber by contract. An agreement in force for a considerable time 
limited to eight the number of agencies that might be main- 
tained in New York City by each of the nine roads competing for 
westward bound traffic from that city. As it is a fact of ordinary 
observation that such agencies always cluster in particular regions 
and around particular corners, it is obvious that a system of joint 
agencies would afford the public equal accommodation at lower 
cost. 

" During the periods of unbridled competition, popularly known 
as ' rate wars/ each participating carrier sends its freight and 
passenger agents to every important city in the country at a 
total expense for rents, clerk hire, advertising etc., that must be 
enormous. Four roadfl operating westward from Chicago are 
known to have expended $1,283,585 for outside agencies and ad- 
vertising in a single year, dining which rates were fairly main- 
tained, while during an equal period one road terminating at New 
York City expanded 9871,29] for similar purposes." 



The Wastes of Competition 87 

Unquestionably trusts can, as a rule, produce more 
cheaply than small concerns. Unquestionably they can, 
as a rule, undersell small competitors. Unquestionably 
they can, as a rule, give the consumer the same or better 
goods at lower prices. What the saving by this method 
would aggregate can neither be accurately computed nor 
even approximately estimated. But it cannot be doubted 
that annually countless millions are spent in useless adver- 
tising, in paying unneeded commercial travelers, in need- 
less transportation, in the insurance and care and storage 
of superfluous stocks, in making good the losses of bad 
debts, in paying for the increased expense of poorly 
equipped plants, and in divers other ways. By no means 
all of the expenditure for these purposes is a waste, but 
very much of it is. A large part of it is saved by the 
methods of trusts. Cheaper commodities to the consumer 
are certainly made possible. But does he get them? Does 
the producer pocket all this saving, or does the community 
get some of it? The community asks: "Will not the 
trust producer having the sole supply, or the practical con- 
trol, of this particular commodity easily persuade himself 
that the saving is of his own creation, and that therefore 
he is entitled to all of it as increased profit? Will he not ? 
indeed, eventually possess a monopoly, having, by reason of 
his very ability to undersell, driven out all competitors; 
and will he not, then, instead of reducing the price in 
accordance with the reduced cost, raise the price to an 
extortionate point? " 



CHAPTEE V. 
WHAT IS MONOPOLY? 

A trust is a gigantic industrial enterprise, but it is more 
than that. One should never lose sight of the fact that it 
is a union of producers who were formerly competitors, and 
that frequently it is a consolidation of all or nearly all those 
who, prior to the formation of the trust, were competitors. 
He who sees in trusts only big enterprises, is as blind as 
would be he who, standing on the edge of Vesuvius' s crater 
when the volcano was in eruption, would see it only as a 
big hole; or as would be one who, swimming in the ocean, 
might be attacked by a shark, and would see it only as a 
big fish. The manner in which trusts obtain their size and 
in which they will probably use it, is quite as important as 
the size itself. 

The wastes of competition are, as we have seen, one of 
the causes of trusts, as well as of all other increases in the 
size of industrial organizations; yet a trust attains its size 
not by waiting for competition to slowly kill off the weak 
competitors, but by anticipating and forestalling this ex- 
tinction. Competition is the cause, btit the paradoxical 
result is an attempt to stop competition. Trusts are com- 
binations of competitive producers for the purpose of end- 
ing competition between them; and the result is generally 
a territory of greater or less extent in which there is no 
active competition whatever. This abolition of active com- 
petition between existing competitors is not infrequently 

88 



What is Monopoly ? 89 

called monopoly, — a word that is an epitome of favoritism, 
partiality, greed, extortion, and oppression. 

There can be no satisfactory talk until one knows what 
he is talking about; no useful discussion until the terms 
which are to be used are clearly understood, and the words 
which are to be employed are accurately defined. The word 
" monopoly " will be used millions of times in the discus- 
sion of trusts. It will be the summarized indictment of 
those who think trusts evil and only evil. It will be the 
substitute for evidence and proof — the " So, there now/' 
of those whose convictions are stronger than the arguments 
which they advance. What is monopoly? It is necessary 
to know, for in the coming presidential campaign it will be 
repeatedly laid down as axiomatic that trusts are monopo- 
lies. 

From time immemorial English and American courts 
have passed judgments against monopolies, and the consti- 
tutions of our states as well as the spirit and genius of our 
people have declared them repugnant to free institutions. 
What, then, is this odious thing? Monopoly, etymologi- 
cally, means the sole (power of) selling. A monopoly in 
any commodity exists, in reality, only when one person or 
association of persons has the exclusive ability, power, or 
legal rigid to sell that commodity. If any one else has the 
power and ability as well as the right to sell it, no monopoly 
exists, even if only one person does in fact engage in its 
sale. Monopoly is sole power: monopoly is exclusion. The 
dusty tomes of the law are filled with decisions and rulings 
concerning monopoly, from the time of Coke to this day; 
but in these decisions, at least down to within very recent 
years, " monopoly " has had even a narrower meaning than 
that above given. It may fairly be said that the legal 
meaning of the word, as commonly used by judges and 
courts, was for centuries u the sole legal right to sell a cer- 



90 The Trusts 

tain commodity, or in a certain locality" The law concern- 
ing monopolies and restraint of competition has been thus 
summarized in the American and English Encyclopedia of 
Law; and in the same work it is declared that an agree- 
ment between two parties to prevent competition between 
themselves, and which leaves each party in its respective 
territory open to the free competition of all other corpora- 
tions or individuals who may choose to engage in the busi- 
ness, is not a monopoly. (Am. & Eng. Encyc. of Law, 1st 
Ed., Tit., Monopoly.) This doctrine has been slightly 
modified in recent cases, as will be seen later. The mon- 
opolies that the courts had to consider for several hun- 
dred years — down to within the past century — were exclu- 
sive rights granted to one person or a few persons in that 
which was before, a common right. They were special and 
exclusive privileges in trade bestowed by the king or other 
sovereign power, giving to the favored person the sole right 
of trading, and absolutely denying that right to others, — 
restraining the latter of the commercial freedom and v lib- 
erty they had before enjoyed and hindering them in their 
lawful trade. The disability of the latter was a legal dis- 
ability, created not naturally but arbitrarily, enforced not 
by economic laws but by the powers of tyranny. Such 
monopolies are, indeed, repugnant to free institutions. 
They are truly violations of personal liberty. English juris- 
prudence dealt for centuries with this kind of monopoly, 
and it should never be forgotten that its decisions concern- 
ing monopolies apply only to this class of trade restrictions. 
Not until the closing quarter of the nineteenth century was 
industry so centralized that, without any grant of exclusive 
right by the sovereign, any one field of it was so com- 
pletely in the possession and control of any one person or 
corporation, that it seemed as if there was a real inability 
to undertake successfully to compete in it. The decisions, 



What is Monopoly ? 91 

therefore, on monopoly rendered in these earlier days are 
not controlling. They may be to some extent analogous, 
but they are not strictly applicable. What has been con- 
demned in these decisions by the courts for several cen- 
turies, therefore, is another thing than that which is now 
popularly called monopoly. It is not the " trust " that 
has been, in these early decisions, declared repugnant to 
the institutions of a free people, and inconsistent with 
liberty; nor is it anything, however great its power, that 
has acquired its power only in the bitter struggle of com- 
petition and without the denial to others of equal rights. 
"We cannot cause the dissolution of trusts or the punish- 
ment of their officers by citing these old judicial decisions 
concerning " monopolies," which were legally different, al- 
though doubtless laws and decisions against contracts in 
restraint of trade and unlawful combinations and conspira- 
cies, are precedents to be followed. 

On the other hand, simply because trusts are not mon- 
opolies, according to old-established legal definitions, one 
should not take it for granted that they contain no evils; 
or that, for that reason, they have not the sole power of 
sale over the commodities they produce, with a power to 
fix prices at will and to control production arbitrarily. 
They may or may not have this power. The mere fact 
that they aTe not legal "monopolies," as the term was 
used for centuries, does not determine that question. The 
sovereign may not give a person an exclusive right to sell, 
but if one in any way acquires the exclusive power to sell, 
others will be injured fully as much as if the sovereign recog- 
nized in him an exclusive right — probably more so, because 
the exclusive power would brook no competition and would 
show little or no mercy; while the exclusive right which 
was granted might be infringed upon. The changed in- 
dustrial conditions of the nineteenth century have brought 



9 2 The Trusts 

it about that not infrequently combinations of men and 
great corporations have been able apparently to secure all 
the means of production and distribution in a certain in- 
dustry, and to have apparently the sole power of selling or 
producing; and our legal conceptions and judicial defini- 
tions of monopoly are rapidly adjusting themselves to that 
condition, real or supposed, which may, perhaps, be best 
described as " practical monopoly." Thus Judge Barrett, 
of the Supreme Court of New York, in the case of The 
People vs. The North Eiver Sugar Eefining Company, de- 
clared that monopoly is "any combination, the tendency 
of which is to prevent competition in its broad and general 
sense, and to control, and thus, at will, enhance prices 

to the detriment of the public Nor need it be 

permanent or complete. It is enough that it may be either 
temporarily or partially successful. The question in 
the end is, 'Does it inevitably tend to public injury?'" 
This was the definition of monopoly which Judge 
Barrett gave in the Sugar Trust case, as being appli- 
cable to the industrial condition created by that trust 
which, he said, " can close every refinery at will, close some 
and open others, limit the prices of raw materials (thus 
jeopardizing, and in a considerable degree controlling, its 
production), artificially limit the production of refined 
sugar, enhance the price to enrich themselves and their 
associates at the public expense, and depress the price when 
necessary to crush out and impoverish a foolhardy rival." 
In the case of Kichardson vs. Buhl the Supreme Court of 
Michigan said: "All combinations among persons or cor- 
porations for the purpose of raising or controlling the prices 
of merchandise or ant/ of the necessaries of life, are mo- 
nopolies and intolerable^ and ought to receive Hie condem- 
nation of all courts" Chief Justice Fuller in deliver- 
ing the opinion of the Supreme Court in the Sugar case 



What is Monopoly? 93 

(the Knight case), said: "All the authorities agree that in 
order to vitiate a contract or combination, it is not essen- 
tial that it shall be a complete monopoly; it is sufficient if 
it really tends to that end and to deprive the public of the 
advantages which follow free competition" 

Not only do the opinions of the judges of our courts rec- 
ognize that under our modern industrial conditions we 
may, without the grant to certain persons of exclusive 
privileges by the sovereign power, be made, nevertheless, 
the victims of a grinding and merciless and extortionate 
monopoly, but the popular comprehension of this fact, or 
the popular fear, has caused statutory definitions of mon- 
opoly to be laid down along the same lines. 

Monopoly, whether it be the result of exclusive privileges 
granted by the sovereign, or simply the sole power of pro- 
duction and selling, which comes from the possession of all 
the existing agencies for cheap production and distribution, 
is the curse of industry and the bane of liberty. In earlier 
chapters we have shown the evils and wastes of competi- 
I tion. No painter can portray in colors that are 
sufficiently lurid the wretchedness and misery and 
poverty that often result from excessive competi- 
tion. No tongue is eloquent enough to describe the evils 
that frequently result from this system of industry, with 
its tendency to develop the selfish characteristics of human 
nature and to produce heartlessness and indifference to- 
wards the welfare of others. No statistician or economist 
can compute or measure the enormous waste and destruction 
occasioned by competition. But worse than competition is 
monopoly, — the paralysis of industry and the death of 
liberty. Monopoly is the sole power to sell, — the complete 
lack of effective competition. With all its faults and evils 
and wastes of excessive competition, it is competition, never- 
theless, which is the great incentive to the creation of 



94 The Trusts 

wealth and the stimulus to all our progress. It is compe- 
tition between sellers that has quickened invention and 
skill and given to us labor-saving machines and processes. 
It is competition that urges improvement in the quality of 
the products; it is competition that stimulates production 
to supply the enlarged demand; it is largely competition 
that has increased the employment of labor, raised wages 
and improved the condition of the laboring classes. Ex- 
cessive competition is the fever that burns and kills; but 
complete lack of competition — monopoly — is rigor mortis. 
In earlier chapters we have pointed out, and in succeed- 
ing chapters we will continue to point out, numerous ways 
in which the modern trusts that are formed for the pur- 
pose of controlling competition between those who enter 
into them, are of economic value; many ways in which they 
are, or may be, of great benefit to consumers, as well as 
to producers; many ways in which they may be of advan- 
tage to the wage earners. We will show how the hosts ihat 
will be displaced from positions and employment by these 
improved methods of organization will, or may, in time, find 
new situations; and how opportunities of employment will 
become more numerous, and the production of wealth more 
abundant. But there is one essential element to the real- 
ization of all these beneficent results; that essential is the 
lowering of prices in proportion to the cheapening of the 
cost of production. If by means of new discoveries or new 
processes or new methods of organization, five hundred men 
can do the work that formerly required a thousand, and if 
the cost of the article is reduced, the community will re- 
ceive no advantage unless the price be reduced accordingly. 
What cares the consumer how much the cost of production 
is? His concern is the selling price — the cost to him. If 
with the displacement of labor and the cheapening of the 
product there be a lowering of the price, there will be a 



What is Monopoly ? 95 

consequent increase in consumption. At least some of 
the five hundred displaced laborers will find new employ- 
ment in the effort to supply the increased demand. The 
rest will in time, doubtless, find employment in other in- 
dustries. The community will have the cheaper and more 
abundant product; the wage-earner will obtain more con- 
stant work and remunerative wages. But if the cost of 
the product be cheapened and the five hundred laborers are 
displaced and the price be not reduced proportionately, 
there will be no increase in the consumption, but a con- 
stantly growing decrease; for the general body of consum- 
ers will have no incentive to increase their consumption of 
the product, and the five hundred displaced laborers, and 
all those dependent upon them being now without wages, 
without money and without the price, are removed from 
the ranks of consumers. The demand for the product has 
not only failed to increase, but has begun to decrease. The 
lessening of the demand means the discharge of more labor- 
ers, who, without employment and without means to pur- 
chase, still further decrease the army of consumers. The 
increasing number of unemployed and the relatively small 
amount of work mean an inevitable reduction of the wages 
of those who are retained, and a further decrease in the 
demand or purchasing power of the community. The de- 
crease in the demand for the manufactured article means a 
decrease in the demand for the raw material from which 
the manufactured article is made, and this means lower 
prices to farmers and planters, lack of employment for 
farm-hands, less demand for agricultural implements, and 
the closing of factories in which these implements are 
made. The inevitable result is more men out of employ- 
ment, wages again lowered, a further decrease in the de- 
mand, lessening of production, lack of purchasing power on 
the part of the community, depression, stagnation, and 



96 The Trusts 

finally bankruptcy, misery, want, and despair. The only cor- 
rective, the only revivifying influence is a lowering of 
prices in accordance with the cheapening of the production. 
We have already referred to the action of the American 
Steel and Wire Company, which, in the spring of 1900, 
suddenly shut down twelve of its mills and threw out of 
employment 4,000 of its laborers. This was done less than 
two months after the head of the concern had uttered 
roseate predictions as to the condition of the company and 
as to the great demand for the goods manufactured by it. 
The reason given for this shut-down was over-production. 
The course that followed — a very proper one — was the re- 
duction of prices, some twenty-five and some thirty-three 
per cent. There was a widespread belief that the action 
was taken for the purpose of depressing the market value 
of the stocks of the company, yet subsequent events seem 
to establish the fact that the reason given was the true 
one; that, if there have been, at any time, any improper 
statements made by the trust officials, they were made when 
they represented that the prospects of the company were 
flourishing. Months before this action was taken by the 
American Steel and Wire Company that shrewd old popu- 
list, ex-Congressman Jerry Simpson, who has been the butt 
of ridicule of Eastern economists as well as of Wall Street 
plungers, predicted this very action on the part of the wire 
trust. On February 14, 1900, at the Anti-Trust Confer- 
ence held in Chicago, Jerry Simpson said:* 

" Take, for example, articles of common consumption, particu- 
larly in the Western States — barbed wire and wire nails (these 
are the products of the American Steel and Wire Company). The 
enormous advance in price is causing a rapid decline in con- 
sumption; the factories and the storehouses of jobbers and re- 
la ilera are filling with supplies. It is reported that in the Eastern 
States fanners are returning to the primitive rail fences. Hence 
wc shall hear of the wholesale discharge of men employed by the 



What is Monopoly ? 97 

trust; and they being without work and without money to buy 
the products of the farm, will thus affect the farmers injuriously, 
and so on through the whole gamut of industrial activity. It is, 
therefore, more than probable that before many months elapse 
the parrot cry, ' over-production/ will be heard in the land, while 
the gaunt wolf of poverty sits upon hundreds of thousands of 
thresholds." 

With what wonderful quickness Jerry Simpson's proph- 
ecy has been fulfilled! 

The truth, then, is that if trusts are run as monopolies 
instead of being economically an advantage to the public, 
they will occasion a frequent recurrence of the evils of com- 
petition. High prices will cause that which is called over- 
production, namely, an excess of production over the de- 
mand at the prices quoted, and we will also have shut-downs 
and low wages, men out of employment, and all other forms 
of industrial wretchedness. These evils will come whenever 
trusts are run upon the monopolistic principle and when- 
ever prices are put up or kept up above the point of fair 
profit. 

But a lowering of prices always causes an increased de- 
mand and an enlarged output, which in turn mean more 
employment for labor, which itself results in higher wages, 
which again means an increased purchasing power on the 
part of the wage-earners, and a further demand, and a still 
greater abundance of production, as well as a larger market 
for raw materials, higher prices for farm products, an in- 
creased need of agricultural implements, a larger demand 
for farm labor, higher wages, and a further enlargement 
of the consuming and purchasing powers of the farmers 
and planters and farm laborers for manufactured products; 
and so on, in one endless chain of plenty and prosperity. 
Thus, whatever tends to lower prices, provided it is the 
result of cheaper production, of labor-saving, and not of 
arbitrary wage-reduction or arbitrary depression of prices 



98 The Trusts 

of raw materials, means the industrial welfare of all classes, 
producers and consumers, employers and employees, manu- 
facturers and farmers, old and young, rich as well as poor. 
It is apparent that there can be no beneficial lowering 
of prices unless there is a cheapening of the cost of pro- 
duction. It has been shown how trusts can, generally, 
produce much more cheaply than individual competitive 
producers. Low prices cannot exist unless there is cheap 
production. The cheapest production makes possible the 
lowest price. The cheapest production, provided it is not 
the result of the degradation of human labor, and if fol- 
lowered by the lowest price, means the greatest prosperity. 
The proper policy, then, to pursue with reference to trusts 
is to endeavor to obtain all their economic advantages and 
yet, by all means, to guard against monopoly. If the 
monopolistic element can be wholly eliminated from them, 
they may become one of the greatest industrial boons in the 
world's history; if they are, in practice, monopolies, even 
though not essentially so, they are the greatest curse 
that has fallen upon the race since it was condemned to 
eat its bread in the sweat of its face. If it is not possible 
to have trusts without monopolies, trusts must be de- 
stroyed, or else industry will be ruined and liberty over- 
thrown. Human nature is unable to exercise unrestrained 
power with fairness. Such power is sure to be abused and to 
be applied tyrannically. The power over industry is the 
greatest of all powers. If you can control a man's liveli- 
hood, you control his life. If you control his opportuni- 
ties for work, you control all his energies and faculties. 
If you control these things, you control all his liberties; 
he will not long retain liberty of thought or liberty of 
conscience. If the trusts of to-day are really monopolies — 
if they are in effect monopolies — then have we lost our 



What is Monopoly? 99 

liberties; then in place of four million slaves, there are 
eighty million. Are we to have a nation of white slaves? 

The pertinent inquiry, the real turning point, the crux 
of the whole trust problem, is: Are trusts monopolies? Do 
trusts have this exclusive power of sale over products? Can 
they arbitrarily fix prices? If so, that power must be over- 
ruled. There are many who insist that trusts are nothing 
but great industrial organizations, differing from earlier 
organizations only in being larger. These men, among 
them Geo. Gunton, argue that trusts do not abolish com- 
petition but intensify it. They assert that combination 
has not in the past destroyed competition; that it has 
seemed to do so, but, that, in fact, each death of competi- 
tion has witnessed a revival of stronger and more keen com- 
petition. They point to the cotton industry as an example. 
At one time all cloth was woven by hand-loom. Power- 
looms were invented; they could be used profitably only in 
factories where the specialization and division of labor 
could be secured to a greater extent. They necessitated 
greater combination of capital. They manufactured more 
cheaply and they drove out the workers of the hand-looms; 
but there soon sprang up competing power-loom factories 
whose competition was more widespread and more keen 
than those of hand-loom weavers. Small factories under 
individual owners were succeeded by larger factories under 
corporate control. The more it was possible to centralize 
and combine, the greater were the centralization and com- 
bination; but the fewer the competitors, the more fierce 
was the competition and the lower was the price of the 
manufactured article. All industries show larger and 
larger, but relatively fewer and fewer concerns. It will 
be conceded by nearly all that the fewer and the larger 
the competitors, the keener the competition. It is a battle 
between giants. " But," say the millions who are now 

Ltft 



ioo The Trusts 

studying trusts, " is not the battle of the giants for su- 
premacy? Is it not in every case a fight to the finish? 
When the war of competition is over, is not one of the 
competitors either killed or subdued? Is he not destroyed 
or annexed? In any case is there not one less? And are 
not things tending inevitably and rapidly to a condition 
when, in every industry, there will be either only one es- 
tablishment, or else one establishment so great that it will 
dominate the whole industry and have a practical monop- 
oly?" 

We have already clearly shown that under the com- 
petitive system the demand for cheaper production tends 
to make the cheapest the biggest, and tends ruth- 
lessly to destroy the enterprises that are not the cheapest. 
The ultimate survival of none but the cheapest is the 
irresistible movement of competition. Monopoly is thus 
the goal of competition; or as Mr. Henry D. Lloyd, the 
author of Wealth Against Commonwealth, has so .sen- 
tentiously expressed it: "Monopoly is business at the end 
of its journey" The peculiarity of a trust is its attempt 
to consolidate all competitors. This, indeed, seems most 
clearly to distinguish trusts from all other large concentra- 
tions of capital. There appears, indeed, .to be a difference 
in character rather than in size, viz.: that trusts are not 
merely great enterprises for the purpose of securing 
economical and cheap production and distribution, but 
" octopi " that endeavor to reach out and gather in all 
industries in order to kill all competition and to control 
all the means of production in those industries, and to obtain 
full possession, when possible, of all the sources of raw 
materials and all the cheap means of distribution. It is 
tli is attempt at monopoly, and the apparent success of the 
movement, thai makes the world to-day apprehensive. It 
is not to be wondered that the people tremble in the pres- 



What is Monopoly? 101 

ence of the power of trusts. It does appear, often, as if 
they had a monopoly, as if we were utterly at their 
mercy, as if they could unduly raise or depress prices and 
unduly limit production and give us any quality of product 
they choose. Before running from this overshadowing 
phantom let us see to what extent any trust yet formed 
has acquired sole power or full control. 

In Chapter I, concerning the size of trusts, we have 
mentioned the extent of the control of various trusts over 
certain fields of industry. The most striking fact is that, 
with few exceptions, each trust controls the large majority 
of the plants in its industry; but it is somewhat significant 
that no trust has for any length of time had full control 
of any field of industry. The American Sugar Eefining 
Company, better known as the Sugar Trust, many years 
ago, was said to control ninety-eight per cent of the sugar 
trade, a proportion of it that was certainly sufficient to 
dominate the entire business and to enable it absolutely to 
control production and arbitrarily to fix prices, if any trust 
has such power. In 1898, two great refineries, one belong- 
ing to the Doschers and the other to Arbuckle Brothers, 
went into operation and the competition has certainly 
been keen enough since that time. The Standard Oil 
Company is popularly supposed to have, or to have had, 
a complete monopoly of the refining of petroleum, but it 
is stated on good authority that there are to-day at least 
one hundred refineries not under the control of the Stand- 
ard Oil Company. Attention has been called in Chapter 
i to the gigantic consolidations or trusts in the steel busi- 
ness, but it is significant that there are at least three of 
them of enormous capitalization. The several tobacco 
trusts mentioned in Chapter I are, in reality, only branches 
of one trust; but this month (June, 1900) bids fair to see 
the launching of a projected company, capitalized at $30,- 



102 The Trusts 

000,000, which" will be a lona fide and powerful competi- 
tor. 

Monopoly, the sole power to sell, is the power to fix 
prices. Let the sole power to sell be permanent, let the 
thing over which the power exists be a necessity, and it is 
as certain that a price greatly in excess of the cost of pro- 
duction will be charged as it is that human nature is selfish 
and that in making an exchange each person will get all 
that he lawfully can. If the monopoly be not permanent, 
if the article affected by it be not an absolute necessity, 
the tendency to charge an undue price will vary in propor- 
tion to the ability of the consumer to wait till the time 
when others can produce and sell the article, to the ability 
of competition to spring up quickly, and to the possibility 
of procuring some article as a substitute. If trusts are 
monopolies they are absolutely certain to raise prices. Let 
us, therefore, consider the power of trusts over prices, for 
our investigations in that subject will help us to answer 
the question: Are Trusts Monopolies? 



CHAPTEK VI. 
PRICES AND POTENTIAL COMPETITION. 

If prices are not to be put up, what is to keep them 
down as trusts spring up and continue? Trusts are formed 
to destroy competition. When active competition is de- 
stroyed, — when you have cut this string on your hitherto 
captive balloon of prices, will it not soar higher and 
higher? 

Trusts are not, never have been and never can become 
complete, permanent, absolute and oppressive monop- 
olies. They cannot for any great length of time charge 
exorbitant prices. But what is the force that will tend to 
keep trust prices from becoming unduly high? What is 
to save us from the dangers of extortion by trusts? Is 
it the mercy of capitalists? Is it possible that sympathetic 
motives cause their bosoms to heave and swell like the 
ocean? Not at all. The trust owners are the heads of busi- 
ness concerns. They are engaged in them not as philan- 
thropists, or as managers of charitable aid societies. They 
may be philanthropic and charitable, but they believe these 
things should be divorced from business. John D. Eocke- 
feller has given millions to the cause of education, but, 
probably he would not make any claim that the Standard 
Oil Company was run for the good it could do, and prob- 
ably he would not consider it a bright idea to try so to 
run it. The trust problem would quickly settle itself if 
business motives did not prevail. Trusts would soon go to 

103 



104 The Trusts 

the region of faded hopes. No, the relief of the people 
from extortion by trusts and from excessive prices, will 
not come from the unselfishness of trust directors, but if 
it comes at all, it will come either from their selfishness, 
or from the people rising in their might and asserting their 
power. It will not be because the hearts of trust magnates 
are bleeding for the people, but because they fear that, 
financially, they will be bled if they attempt to charge 
an unduly high price. Self-interest is a corrective and 
a remedial agency for monopoly. Self-interest seeks the 
greatest profit; but the greatest aggregate profit is not ob- 
tained by asking the highest price, nor even generally by 
asking a high price. A significant drop in the price of 
one trust product has recently occurred. Much has been 
said about the increase in prices of the products of the 
American Steel and Wire Co., such as wire nails, etc. In 
the month of April of this year, prices on those goods were 
reduced between $18 and $22 per ton or about $1 per keg 
on nails, a cut of from 25 to 33 per cent. The cause was 
said to be over-production. In other words, at the high 
price the trust was unable to sell all its products. It 
could make more money at the lower price. Doubtless 
we have for a time been overcharged by this trust, but 
such extortionate prices cannot be maintained, and we 
sincerely believe that a few experiences of this kind will 
teach even trust magnates in general that low prices mean 
large aggregate profits. ♦ 

High prices do not pay because they breed competition. 
A trust may have succeeded in acquiring control of an 
industry, in abolishing or destroying its competitors, in 
having a practical monopoly, that is, in having all the 
trade, all the factories, and all the men experienced in the 
manufacture. Yet it cannot raise its prices very much 
without giving birth to new competition, losing a part, 



Prices and Potential Competition 105 

if not all, of its trade, and rendering its factories and 
business less valuable. There is at least one thing in which 
there is no monopoly, and that is trusts themselves. Any 
set of capitalists can form them; and there is capital in 
abundance, — idle capital in abundance. The lessening rate 
of interest proves this. One of the great questions of the 
present day that is forcing itself upon the minds of civil- 
ized people, is where openings are to be found for the 
profitable investment of saved up wealth, that is, of pro- 
ductive capital. For over twenty years there has been a 
diminishing return upon all classes of investments, and the 
prices of first-class securities have been constantly getting 
higher. The interest rate has been lowered; government 
bonds that yield but two or three per cent sell above par; 
loans upon bonds and mortgages of sufficient security can 
be obtained with ease at four per cent; banks are troubled 
with a plethora of money. 

Capital is always on the lookout for investments. It is 
the most intrusive thing in the world. It is the most 
mobile. It is a thing without a country. It is not bothered 
much by distance or frontiers. It is international. The 
" Great West " of our own country was built up largely by 
England's capital; so was Australia. The Boer war is the 
result of English development of South Africa. United 
States financiers have lately loaned $25,000,000 to Eussia. 
All the nations of Europe have acquired spheres of influ- 
ence in China and colonies in Africa, into which their 
capital will flow. Uninvested capital seeks investment. 
Invested capital dreads competition. Its most effectual, 
its only permanently effectual, way of hindering competi- 
tion is in keeping down the prices of its product. 
There is then a great latent competition, — a potential 
competition, — a competition which is sure to spring 
up if prices become extortionate. Trusts have not 



106 The Trusts 

stifled competition; they may stop it among the per- 
sons who form the trusts; they may, indeed, gather 
into one union all the productive agencies of a certain 
industry existing at one time, but they cannot monopolize 
the vast capital of the world or the people's irrepressible 
and illimitable energy. 

Existing trusts have been greatly affected by this poten- 
tial competition. At the annual meeting of the Glucose 
Sugar Eefining Company, which was organized in August, 
1897, and which is capitalized for about $37,000,000, and 
which controls nearly all the glucose sugar refineries of the 
country, its president said: 

"There is not at this time a bushel of corn being ground by 
any concern except those of our company. We do not intend to 
pursue the policy of making spectacular profits in the beginning, 
and dwindling at the end. We are in business for a long pull. 
For instance, on a ten-year run we might have raised prices, 
made $5,000,000 the first year, $2,500,000 the next, $1,000,000 the 
next, and down to nothing at the end of ten years. It is better 
business to be moderate and earn $2,000,000 a year for ten years, 
which would be $20,000,000 in profit, against the loss of $10,000,000 
the other way. We did for a short time make the mistake in the 
beginning of putting the price too high, but it did not last long. 
If we had maintained that policy, we would have sixteen or seven- 
teen competitors against one as it is now." 

Ex-Speaker Eeed, in a recent article on monopolies, 
among other things, said: 

" A good many years ago a wise old manager in my district 
told me the secret of success. I said to him : * ' You are the only 
man who makes these things. You can demand your own price/ 
Said he, ' I am trying every minute to make these goods cheaper 
and sell them cheaper.' 'Why so?' 'I am the only man,' he re- 
plied, ' in this business and I want to stay so. If I raise the price, 
I would have a boom, but I would lose a business. . In the long 
run business is better than boom. , " 

The Standard Oil Company may be cited as the typical 
trust. It is the oldest and possibly the most powerful. It 



Prices and Potential Competition 107 

has had some, but relatively little, competition. How has 
potential competition affected it? What has been the 
tendency of the prices of the Standard Oil Company? The 
following table shows the price of the crude oil at the 
wells, and of the refined in New York for export, also the 
difference between the crude and the refined, that is, the 
cost for refining for each year from 1870 to 1897: 

AVERAGE ANNUAL PRICE PER GALLON IN CENTS OF REFINED 
AND CRUDE PETROLEUM. 

Difference. 

17.16 

13.72 

14.16 

13.75 

10.17 

10.04 

13.17 

9.76 

8.00 

6.04 

6.81 

5.98 

5.52 

5.50 

6.16 

5.82 

5.38 

5.13 

5.41 

4.87 

5.24 

5.18 

4.75 

3.72 

3.20 

4.14 

4.15 

4.04 



Year. 


Crude at 
Wells. 


Refined in 

New York. 


1870 


9.19 


26.35 


1871 


10.52 


24.24 


1872 


9.43 


23.59 


1873 


4.12 


17.87 


1874 


2.81 


12.98 


1875 


2.96 


13.00 


1876 


5.99 


19.16 


1877 


5.68 


15.44 


1878 


2.76 


10.76 


1879 


2.04 


8.08 


1880 


2.24 


9.05- 


1881 


2.30 


8.01 


1882 


1.87 


7.39 


1883 


2.52 


8.02 


1884 


1.99 


8.15 


1885 


2.11 


7.93 


1886 


1.69 


7.07 


1887 


1.59 


6.72 


18SS 


2.08 


7.49 


1889 


2.24 


7.11 


1890 


2.06 


7.30 


1891 


1.67 


6.85 


1892 


1.32 


6.07 


1893 


1.52 


5.24 


1894 


1.99 


5.19 


1895 


3.22 


7.36 


1896 


2.83 


6.98 


1897..... 


1.87 


5.91 



108 The Trusts 

In studying these figures, certain facts should constantly 
be borne in mind. In 1870 and 1871, the quality of 
the oil was poor; its production was in the hands of a large 
number of independent rivals, and the refining of oil was 
not a profitable business. The first alliance between the 
Standard Oil Companies of Ohio and Pennsylvania and the 
Pratt Co. and the Atlantic Eefining Co. was in 1871 or 
1872. This alliance may be considered the nucleus of the 
trust. For several years after the alliance was formed 
there was strong competition, although it can hardly be 
questioned that the Standard Oil Companies and their 
allies had the advantage of railroad discrimination in their 
favor and of special privileges. The date of the formal 
organization of the Standard Oil Trust is 1882; but the 
control of the trade had undoubtedly been secured prior 
to that time. The subsequent incorporation was but a 
change in name. An examination of the figures for this 
period from 1871 down to 1897, shows: first, a decline in 
the price of the crude; second, a greater decline (in 
amount) in the difference between the price of the crude 
and the refined; that is, the charge made for refining and 
transportation has decreased. The decline was generally 
uniform and progressive from 1870 down to 1882, the date 
of the formal organization of the trust. That year the 
price of the crude was 1.87, the price of the refined, 7.39, 
the difference, or charge made for refining and transport- 
ing, 5.52. In 1897, the price of the crude is again 1.87, 
but the price of the refined has gone down to 5.91, the 
difference between the cost of the crude and the refined, 
thai is, the charge made for refining and transporting, being 
4.04. With the exception of two years, 1893 and 1894, 
the price of the refined was never so low as in 1897. The 
price of the crude was relatively low in the years 1893 and 

1891. The difference between the cost of the crude and 



Prices and Potential Competition 109 

the refined, that is, the cost of refining and transporting, 
was never so little as in 1897, except in the years 1893 and 
1894. Of course, there have been enormous savings in the 
cost of transportation, and wonderful inventions and im- 
provements in the processes of refining, which must have 
made the cost to the trust much less; but one is forced 
to the conclusion that, all in all, coupled with a wonderful 
improvement in quality, the Standard Oil Trust has not 
only cheapened the cost of oil, but has lowered the price 
charged for refining and transporting. George Gunton's 
deductions from his figures, which are substantially the 
same as those given above, are as follows: 

" The petroleum industry began in 1859. From then until about 
1871 illuminating oil was produced by a large number of con- 
cerns. The oil was very poor and dangerous to use. From 1863 
inclusive, when oil jroduction was becoming an established busi- 
ness and full statistics were available, until 1871, the price in 
gold fell from 30.7 to 21.7 per gallon, or 29 3 / 10 per cent. From 
1871 to 1880, under the Standard Oil Company, the price fell from 
21.7 to 9.125, or 58 per cent; and from 1880 to 1898 (the price in 
1898 being 5.7), during which period the industry has been under 
the control of the Trust, the price has fallen from 9.125 to 5.7, or 
37 5 / 10 per cent. The production of oil has increased from 9500 bar- 
rels in 1859 to 35,165,990 barrels in 1897." 

The annual consumption of oil is about a billion gallons, 
and a saving of two cents on the gallon, which is about 
the decrease in price between 1882 and 1898, the era of 
the formal Trust, would be $20,000,000 for the year 1898 
alone. If we compare that year with the year 1871, when 
the alliance was made between the Pratt Co. and the At- 
lantic Eefining Co. and the Standard Oil Companies of 
Ohio and Pennsylvania, we find a reduction of sixteen cents 
in the price, which would make a saving or difference 
of $160,000,000 on the output and product for the year 
1898 alone. Whether, indeed, even at these prices, the 



no The Trusts 

Standard Oil Co. is not receiving an undue profit and 
charging an undue price, may be a question; but it is rather 
a difference of opinion as to what constitutes a fair profit 
than it is a question of fact. If in explanation it be said, 
on the other hand, that the Standard Oil Company has 
some active competition, then we are forced to the conclu- 
sion that, if this great gigantic industry cannot become 
a monopoly, no other industrial trust can. If the feeble 
active competition which the Standard Oil Trust has had, 
is not the cause of lowered prices, then we must ascribe 
it to that great latent potential competition, — that fear of 
active competition, which keeps prices within the limits 
of reasonable profits, just as the fear of death deters the 
would-be murderer from carrying out his villainous de- 
signs. 

However powerful trusts may be, if they raise prices 
beyond the point of fair profits, sooner or later (and the 
higher the prices, the sooner) they will meet with competi- 
tion. Weak competitors may go down before them, but 
there is one thing at least which trusts cannot monopolize, 
and that is trusts themselves. Others can obtain the capi- 
tal, if there is a fair measure of profit in its investment, 
and can form a rival trust. Why is it that that gigantic 
trust, the American Sugar Company, with its capitaliza- 
tion of nearly $75,000,000, has had such strong competi- 
tion with the Arbuckles and the Doschers? That competi- 
tion certainly would not have arisen had there not been 
a belief that in the business there was an enormous profit. 
It probably would never have come into being had not the 
Sugar Company for many years paid enormous dividends 
upon its profusely watered stock, — seven per cent upon 
its preferred and twelve per cent upon its common. There 
is, indeed, every reason to believe that the competition 
was the result of an excessive price on the part of the 



Prices and Potential Competition 1 1 1 

Sugar Trust. That competition came into being in 1898. 
The table of prices for that year show that the difference 
between the prices of raw and refined sugar, that is, the 
charge for refining it, was .730 of a cent per pound, but 
the year before the competition began it was .946 of a cent 
per pound, a difference of .216 of a cent per pound. This 
may seem too trifling for consideration and an overcharge 
so small as to be unnoticeable, — in no sense an extortion. 
It is true that the burden imposed by it upon any one indi- 
\idual would be so trifling as to hardly call forth a com- 
plaint, but the aggregate amount on the sugar trade of the 
country would be so great as to tempt capital immediately 
to invest in that industry if it were certain those prices 
would be maintained. One-tenth of a cent per pound on 
the sugar consumed in the United States would mean 
almost $3,500,000 per annum, and .216 of a cent would 
mean practically $7,000,000 per year. If the Sugar 
Trust were charging this small sum in excess of a fair 
profit, would it not call forth competition, and is it not 
proper to infer that that was at least one of the reasons 
that did call forth the competition it has met with? It 
should be noticed that in the year 1896, with raw sugar 
higher in price than in 1897, the difference between the 
cost of the raw and the selling price of the refined was 
.908 of a cent per pound; in 1895, it was .882 of a cent, 
and in 1894, .880 of a cent, — the raw in the last two years 
being, however, at a lower price. In other words, for sev- 
eral years prior to the Arbuckle and Doscher competition, 
the charge for refining had steadily increased, — and com- 
petition resulted. 

We have seen that the cheapest producer naturally be- 
comes the biggest producer if free and fair trade exists. 
Theoretically, the cheapest seller is bound ultimately to 
become the sole seller, — a monopolist. If special priv- 



ii2 The Trusts 

ileges are refused and fair competition is compelled, mon- 
opoly can be acquired only by the lowering of prices. Un- 
der such conditions of no special privileges, what are the 
means of the continuance of the monopoly of the cheap- 
est, and how long will it continue? Bourke Cochran, in a 
memorable address on trusts, has answered this question 
substantially as follows: " Only so long as it continues to 
produce and to sell most cheaply, and so long as it does, it is 
a blessing to the consumer and a stimulus to industry." 
The eloquent orator was most careful to point out and make 
clear that this was true only where competition was free 
and where no competitor had special privileges. If to this 
he had added that to ensure this imitation to monopoly, 
it was necessary not only that competition should be free, 
but that it should be fair, — that the powerful and highly 
capitalized should not sell their goods for less than cost 
in one or even in all localities in order merely to undersell 
his weaker competitor, knowing that the competition would 
soon work the ruin of his rival while he, the powerful com- 
petitor, could stand it either because of his ability to make 
a profit on sales in some locality where this ruinous price 
was not charged, or because of his greater capital enabling 
him to stand the loss longer, — if this had been added to 
the other provisos of Bourke Cochran, it would undoubt- 
edly be true that a monopoly not based on or propped up by 
special privileges can be permanently maintained only in 
case it is economically superior, that is, in case it produces 
and sells at the cheapest rate. 

The experience of the last ten years with trusts, as they 
actually exist, amply and conclusively proves this. Under 
present conditions, if combinations are to continue and to 
meet with success, it must be by better and cheaper service 
to the community. Competition can be permanently 
stopped only by continuously selling or serving at a rate 



Prices and Potential Competition 113 

or price lower than others can afford to sell. Even special 
privileges and favors only delay the time when competition 
shall assert itself, for the people will rise and sweep away 
the privileges as soon as they realize their existence. If 
any trust, for any appreciable length of time, exacts an un- 
due or even a liberal profit, new capital will be invested in 
that industry, another trust will be formed, and competition 
will operate with a greater intensity than was possible 
on a smaller scale. The trusts that have continued for any 
length of time are those which have conducted their busi- 
ness on the theory of moderate margins of profit, relying 
upon a large output produced cheaply as a result of all the 
savings that can be obtained by the use of large capital 
intelligently administered, and knowing that in this way 
they could obtain a greater aggregate profit. The only 
trusts that have succeeded or that can succeed are those 
thus managed. The failure of innumerable trusts, " cor- 
ners," and u combines " conclusively proves this. 

It will be insisted that the prices of nearly everything 
controlled by trusts have advanced, in recent years, to a 
large extent; that sugar and oil, at the most, are only ex- 
ceptions, and doubtful ones at that. Byron W. Holt of 
the New England Free Trade League, has said: 

" Out of four hundred trusts which I have enumerated, I do not 
believe that ten have lowered prices. In fact, I know of none, 
except one or two, and these have depreciated the quality of their 
product. In one such case the prices are held so high that there 
are heavy imports of competing goods, although there is a duty 
on them of nearly 100 per cent. In nine cases out of ten trusts 
have raised prices — often more than 50 per cent. That much of the 
present rise in prices is due to general economic conditions is 
probably true. On the other hand, it is just as true that, had 
there been no tariff duties, the rise in prices would neither have 
been so general nor so great." 

The wisdom or folly of the free trade suggestion will 



ii4 The Trusts 

be considered later. At present the fact of importance is 
the increase of prices, and also the admission contained in 
the words that are italicized. 

In considering the recent increase in prices, one should 
not overlook the admission made by Mr. Holt, — "that much 
of the present rise in prices is due to general economic con- 
ditions is probably true." The prices of sugar and oil are 
those entitled to the greatest consideration because extend- 
ing over a longer period of trust control. We should be 
very cautious in making general deductions from the prices 
of other products which have within the past six or seven 
years come under trust control, because the majority of 
our trusts, as was seen in Chapter I, have been formed since 
the great financial panic of 1893. They have been the 
accompaniment of the revival of industry since that time. 
The panic of 1893 witnessed a complete collapse 
of prices. It was absolutely impossible to obtain for any- 
thing its reasonable value as measured by cost of produc- 
tion. This fact, although of almost universal knowledge, 
is lost sight of by the majority of people in considering the 
prices of articles produced by trusts. The prices of most 
articles made by trusts have advanced enormously since 
1893, but it is absolutely unfair and incorrect to at- 
tribute the advance to industrial combination. The rise 
of prices is chiefly the result of the universal demand, and 
it has been as great, if not greater, in lines where no com- 
binations existed. For example, it is said that up to a 
year ago pig tin had advanced seventy-five per cent; steel 
rails, ninety-four per cent; steel plates, one hundred and 
twenty-seven percent; refined bar iron, eighty-two per cent; 
and yet at that time there were no trusts in these industries. 
There are, perhaps, some products the prices of which have 
been unduly raised and maintained, but in these cases, if 
any exist, it is believed that upon investigation it will be 



Prices and Potential Competition 115 

found that the trusts have been able to obtain these prices 
by reason of special privileges, such as prohibitive rather 
than protective tariffs, or by reason of possessing patents 
upon labor-saving machines, or by virtue of unjust dis- 
criminations in their favor by railways and other agencies 
of transportation, or by obtaining the ownership of natural 
monopolies. The important point for us to consider, at 
this stage of our study of the question, is that there is no 
proof that the mere aggregation of capital into gigantic 
trusts or combinations has resulted permanently in prices 
that are higher than would be properly occasioned by the 
increased demand consequent upon the revival of industry. 
If this point can be established, it is of great importance, 
because the evils of trusts, so far as prices are concerned, 
will then be shown to be either merely temporary, or else 
not inherent in trusts themselves but the result of special 
priveleges and of the practice of unfair methods of com- 
petition; and the remedy for these evils, w r hich will natu- 
rally suggest itself as being perfectly efficient and wholly 
sufficient, will be the abolition of all special privileges and 
the prohibition of unfair methods. It is not inappropriate 
here to make brief mention of the prices of tin plate. Tin 
plate promises to be an issue in the campaign against trusts 
as important as it has been in the campaign for a protec- 
tive tariff. The American Tin Plate Company will be cited 
as the typical trust, and much will be said of its extortions 
and of its monopolistic powers. The impression has been 
general that this tin plate trust has unduly advanced the 
prices of its products and has extorted large sums of money 
from the American public, by whose liberal policy it has ' 
been fostered and developed. In a subsequent chapter, in 
which the effect of the tariff upon the trusts is set forth, we 
will give some study to this industry and its prices. But 
it is sufficient now to say: first, that it is by no means 



Ii6 The Trusts 

certain that even the tin plate trust has extortionately or 
unduly raised its prices; and, secondly, tliat assuming that 
it has, its power to do so is due, perhaps, in part, to an 
excessive tariff which keeps out foreign competitors, and 
in part to its having made a contract with the producers 
of tin plate mills and machinery whereby for a consider- 
able period of time no one else can obtain the necessary 
machinery to conduct the enterprise. If that is true, it is 
so clearly a contract in restraint of trade, so manifestly a 
conspiracy against the public, so plain and bald an attempt 
to monopolize, that it should be punished as a crime, and 
every means should be taken to prevent such a company 
from carrying on business. That kind of a trust cannot 
be crushed too quickly or too effectually. 

We have pointed out that potential competition is one of 
the remedies — a partial remedy — against extortionate 
prices. We have shown how invested capital will shrink 
from calling into active competition the latent competi- 
tion of uninvested wealth. It is unqualifiedly true that 
no monopoly that exacts high prices can permanently exist 
against potential competition, provided there are no special 
privileges given to the monopoly and provided there is fair 
competition, but the great difficulty is that potential com- 
petition cannot prevent for all the time a considerable 
amount of extortion. The time that is required to enable 
the potential competitor to establish a business and become 
an active competitor may be a period of 'extortion by the 
monopoly. Potential competition may tend to keep prices 
down; but, although it is doubtless a remedy for any 
prolonged and continued extortion, it is quite as certain 
that it cannot prevent occasional high prices. As men 
often ignore or forget what is their self-interest, they may, 
and, doubtless, not infrequently do, raise prices consider- 
ably higher than that which will afford a fair profit; and 



Prices and Potential Competition 117 

it is possible that in some instances they have kept prices 
for a long time slightly higher than the prices that repre- 
sent fair profits, and at times have raised them almost to 
the point of extortion. 

We cannot wholly rely on the self-interest of men to 
keep them from doing that which is opposed to their best 
interests; for selfishness and greed often overcome one's 
sense of self-interest, and selfishness and greed are short- 
sighted. Self-interest is opposed to intemperance and to 
dissipation and to everything that is immoderate; but how 
many men we find burning the candle of life at both ends. 
Nor can we count on self-interest saving us from business 
follies. Self-interest should teach every man to treat his 
horses gently and kindly, to care for them and to protect 
them; but self-interest so frequently fails in this that we 
have to have societies for prevention of cruelty to animals. 
Self-interest should teach the parent to be kind to his child 
and to educate and to train him for future usefulness; but 
we have to have societies for the prevention of cruelty to 
children and laws which authorize us sometimes to take the 
child away from the parent. Self-interest should teach us, 
as a state, to husband our resources; but we have seen our 
timber lands denuded of their trees, and as a result many of 
our streams, which were once navigable, are now running 
shallow. That " honesty is the best policy " is an old adage; 
but men forget this maxim concerning self-interest, and 
our prisons are filled with thieves and burglars and em- 
bezzlers. Self-interest is, indeed, a powerful influence in 
affecting men's conduct, but the weakness of it is that too 
often our selfishness makes us blind to our real self-interest. 
Because of this, trusts have not infrequently been guilty of 
temporary exactions, pending the establishment of a com- 
petitive industry which, because of its magnitude, will take 
a long time to get under way. 



n8 The Trusts 

We have recently had a most striking example, according 
to the reports of our daily papers. In the issue of tho 
New York Herald for March 20, 1900, it is stated editori- 
ally that Congress is anxious to build a number of warships, 
but that the price of armor plate has been so unduly ad- 
vanced and is at such an extortionate figure that many 
of the members of Congress are unwilling to pay the price 
asked by the monopoly that has control of the industry. 
The editorial states the alternative thus: There is only 
one thing for Congress to do — pay the price asked, or fail 
to build the warships. It cannot obtain the armor else- 
where. If it were to establish an armor making plant of its 
own, it could not get it running for two years. We must have 
battleships without delay, therefore we must pay the price. 

Another instance of the temporary monopoly which a 
trust may have — a monopoly which, while it continues, 
may be most merciless — is the American Ice Co. This 
company, having bought out the Knickerbocker Ice Co. 
and the Consolidated Ice Co., that is, having bought 
about 90,000 shares of the stock of each company, there 
being but 100,000 shares in each, and having made con- 
tracts with all owners of artificial ice plants in the vicinity 
of New York City to take all their surplus, and having 
obtained all the available supply which could under ordi- 
nary circumstances be brought to the New York market, 
and having also obtained special docking privileges of an 
almost exclusive character, — proceeded to put up the price 
of ice far in excess of any increase in the cost of harvesting 
it, resulting from the short crop on the North River. The 
price was raised one hundred per cent; that is, from thirty 
to sixty cents per hundred. The facts connected with this 
transaction are of great importance, for they show that we 
cannot wholly rely on what is truly for the self-interest of 
the trust to protect us from extortion; that the trust can 



Prices and Potential Competition ng 

actually for a time be an extortionate monopoly; and yet 
that publicity is sure, eventually, to break down the most 
powerful monopolies. The raising of the price of ice by 
the American Ice Co. occurred early in May. As has been 
said, the price was doubled — an extortionate exaction. 
There seemed at first no possibility of elsewhere obtaining 
a supply of ice and no means of obtaining a reduction of 
price; but the institution, by Attorney-General Davies, of 
legal proceedings to procure the dissolution of the trust, 
and the commencement of criminal actions against its or- 
ganizers, and a general publicity of the affairs of the com- 
pany in the daily press, and the starting of a few competi- 
tive ice producing plants, have caused a reduction in the 
price to about the former level. On the 22d of May, The 
New York World editorially said: 

" The sun of publicity will soon melt the ice trust." 

On the first day of June, The Rochester Democrat and 
Chronicle stated: 

" The ice trust in New York has dropped prices to forty cents a 
hundred (this from sixty cents; last year's price, thirty cents) 
and is making an effort to get back its old customers. Most of 
them have made contracts with independent concerns and the 
punishment of greed promises to be speedy." 

But what inconveniences the people of the metropolis 
had to suffer before the price was reduced, and what meth- 
ods were adopted to suppress the weak competitors that 
arose, may be gathered from the following extract from 
The New York Herald of June 6th. Though a long quo- 
tation, it is well worth reading, for it sets forth the facts 
of the fight against the ice trust, which make the case in 
many respects a typical one. This article is really an epit- 
ome of trust methods, and it also shows fairly well both 
the strength and the limit of monopoly powers: 



1 20 The Trusts 

"ICE PRICES BEING HAMMERED DOWN. 



INROADS OF INDEPENDENT DEALERS FORCING AMERICAN COM- 
PANY TO DESPERATE MEASURES TO DEFEAT THEM. 



DECOY COMPANIES MAKING BIG CUTS. 



FORTY, FIFTY AND SIXTY-FIVE CENTS CHARGED IN THE SAME 
APARTMENT HOUSE. 



BY THE SAME ICEMAN, TOO. 



ATTORNEY-GENERAL AND CONTROLLER DETERMINED NOT TO BE 
LED INTO ERROR. 

It now appears that the American Ice Company has troubles 
other than those of a legal nature. While it has been fighting the 
attempts to make public its stock book, independent dealers have 
been getting such a foothold throughout a large section of the 
city that the American Ice Company has been compelled to cut 
the sixty-cent price to meet the opposition. 

The situation is unique. The American Ice Company has kept 
several of the small concerns that were taken into the fold busy 
in meeting the outside icemen. These small companies run their 
old wagons and deny connection with the American Ice Company, 
but in reality handle its ice. It is the constant endeavor of these 
icemen to get customers away from the few independent dealers. 
This has been done wherever necessary by deeply cutting rates. 

Apparently this method of doing business is not confined to any 
one part of the city. Wherever the independent icemen have ob- 
tained customers the American Ice Company has met the re- 
duced prices. The sixty-cent rate has been rigidly maintained at all 
of the American Ice Company's offices, and nobody has got cheaper 
ice who has not worked to get it. As a consequence, there is many 
an apartment building in Harlem and on the west side where the 
families on all the different floors are paying different prices for 
ice. In some instances, too, the variations are considerable. 

PRICES VARY IN SAME HOUSE. 

In one house that was visited yesterday the family on the first 
floor paid forty cents, the family on the next floor sixty-five cents 



Prices and Potential Competition 121 

and the family on the top floor fifty cents. The two extremes 
were charged by the same iceman. 

This rate-cutting, altogether irregular, has given rise to several 
rumors that the American Ice Company, fearing the public wrath, 
was lowering its sixty-cent rate. There is evidently no other foun- 
dation for the news, since all the regular offices of the American 
Ice Company quote ice at retail to families at sixty cents — or 
sixty-five cents if there is any good excuse for such a charge. Any 
one who cares to get ice cheap has but to patronize one of the 
independent dealers and the American Ice Company will, through 
one of its decoy companies, meet the cut. 

This is not in all cases easy to do, for the independent companies 
are so rushed with business since the agitation began that they 
cannot get wagons to haul the ice that is ordered. It has been a 
bonanza for the outside concerns. Half a dozen of the smaller 
independent dealers are now planning to manufacture ice for them- 
selves, and will without doubt make money out of the venture if 
the American Ice Company does not lose heart and do away with 
the sixty-cent price. One dealer in West Seventeenth Street is 
making preparations to manufacture two hundred and fifty tons 
of ice daily. 

GETTING ICE IN NEW JERSEY. 

Pending the construction of ice-making plants the independent 
dealers are buying ice in Jersey City and carrying it across the 
ferries in their own wagons. There are two companies in Jersey 
City that sell ice shipped in from ice houses on lakes and ponds 
in Pennsylvania. The ice comes over the Pennsylvania Railroad, 
and this led some of the dealers to suspect that the railroad com- 
pany was really fathering the scheme. 

At the docks controlled by the American Ice Company the price 
(wholesale) charged outside icemen in New York is $7 a ton, or 
thirty-five cents a hundred pounds. These docks are practically 
all in the city, for but two independent dealers, seemingly, have 
facilities on wharves. One of these concerns, Montgomery's, is on 
the North River, and the other, Solomon's, is on the East River. 

Instead of buying in New York, the outside icemen cross the 
river to Jersey City at 1 o'clock in the morning and buy ice there. 
TJwy pay $3 a ton instead of $7, but when the ferriage is added 
and an allowance is made for the driver's time and for melting, the 
cost of the ice runs up to $4.25 a ton. With this Jersey ice the 



t22 The Trusts 

independent dealers have already forced the American Ice Com- 
pany to cut its sixty-cent rate in almost every street in the city/* 

Two days later the prevailing rate was forty cents; a week 
later it was reported to be thirty cents. Doubtless the 
reduction was due both to the legal proceedings instituted 
against the trust, and also to the fear of competition next 
season as a result of the publicity given to the trust's 
profits. 

Potential competition is also an imperfect remedy, be- 
cause, when called into activity, it so frequently is the 
struggle of the weak against the strong. The competitors 
are not on a level footing, and the contest, besides being 
unequal, is unscrupulously conducted. 

There is competition and competition; first, that compe- 
tition which seeks to attract purchasers by better goods and 
lower prices, but at prices that mean fair profits and a 
continuance in business; and, second, that competition 
which lowers prices below the fair profit mark, and the 
purpose of which is not to secure custom for the one so 
lowering the price, but to drive it away from a competitor. 
The one form of competition is healthful rivalry; the other 
is a war of extermination. One is the life of business; the 
other its death-blow. Competition favors the strongest 
competitors. The big usually survive. It is the survival 
of the biggest rather than the fittest that frequently results 
from competition as it is practiced. " Cut-throat " com- 
petition is, in no sense, a practice peculiaf to trusts. But 
when employed by trusts it is a menace to the public, for 
the great trusts have the power to withstand the effects of 
competition longer than their small rivals. In so far as 
this is the result of their ability to produce or market more 
cheaply, which is frequently, if not generally, the case, we 
cannol Bind hull with the competition, for the community 
wants cheapened production, provided it is not secured by 



Prices and Potential Competition 123 

a degradation of the working classes; and the community 
wants lower prices, provided they are not inconsistent with 
fair profits. But competitors do not confine themselves 
within these limits. They are merciless in their methods. 
Prize-fighters do not hit below the belt, but the methods 
of business competitors are usually more brutal than prize- 
fighting. With business competitors, it is war to the death. 
Trusts are probably no worse than individual competitors 
in this respect; but their powers are greater, and the result 
of acts done by them is more injurious than when done by 
feeble individuals. 

In an earlier chapter we showed that competition was 
the mother of trusts. Trusts are born of competition, 
conceived for the purpose of killing competition; and yet 
they use competition as a method of exterminating com- 
petitors. This paradox calls to mind the story of the min- 
ister who once preached two sermons as a candidate for a 
certain church which was without a pastor. His morning 
discourse was from the passage: " Ye are of your father, 
the devil." His evening text was: " Children, obey your 
parents." When it comes to the struggle of getting busi- 
ness or killing off a rival in trade, the methods of the trust 
reflect credit upon its mother, cut-throat competition. A 
good deal depends upon whether the new competitor is 
another giant trust or a struggling individual enterprise. 
If it is a case of rival trust, there may be keen and intense 
competition; but if it is a case of the trust against the 
weak and struggling individual producer, there will be the 
rankest of unfair methods. When Trust meets Trust, 
" then comes the tug of war;" but when the Trust meets an 
individual competitor, then the Trust conducts itself liko 
a thug of the slums. 

Small competitive concerns will spring up more quickly 
than will great ones. Oftentimes the results of careful in- 



124 The Trusts 

dividual attention to a small business will offset the ad- 
vantages of greater capital managed by agents and sub- 
ordinates. Such new small concerns can succeed against 
extortionate prices, and sometimes even where prices are at 
the fair profit mark. But what do they meet with from 
trusts? Cut-throat competition. What is the action of 
trusts in such cases with regard to prices? It is a lowering 
of them in the particular locality where the small hand 
of competition has arisen, — lowering them below the fair 
profit mark, lowering them sometimes below actual cost of 
production, lowering them at any rate to a point where 
the small competitors will eventually be driven from busi- 
ness. Why? Because they have dared to compete. For 
what purpose? In order to kill the competition and 
restore the old prices, or even to exact eventually, higher 
prices that will compensate for the enforced decrease that 
was made to kill competition. The community is inter- 
ested in, — yes, is benefited by low prices; but it is injured by 
sacrifice sales, by " slaughters," by cut-throat competition. 
Sales at a loss soon absorb the limited capital of the weak 
competitor, but the loss of the trust on this fractional por- 
tion of its business is more than made up by its extortionate 
prices in other localities. Sometimes the trust reduces its 
price below cost in all localities. It is the party with the 
largest purse that can stand this cut-throat competition the 
longest, and that party is always the trust. 

The kind of competition just outlined'is in its nature, at 
least, conspiracy. It is the use of one's property not 
directly for one's own benefit, but for the injury of another. 
It violates the spirit, if not the letter, of the law against 
conspiracy. There should be no doubt as to whether or 
not it does. Tf doubl exists, statutes should be enacted so 
as to express in no ambiguous terms their prohibition of 
such competition. It should be declared criminal so that 



Prices and Potential Competition 125 

the strong arm of the state could punish the wrong. Leave 
a struggling competitor to his remedy for damages for tho 
injury done him, and, even supposing that he has a remedy, 
the expense of enforcing it, and the difficulty of showing 
the amount of the damages, makes any real relief impossi- 
ble. The selling by an incorporated company of goods of 
a certain quantity and of a certain quality or cost of pro- 
duction in one locality at a lower or different price or on 
different terms or conditions than are fixed for them in 
any other place (difference in cost of transportation and 
rent and selling — local differences — being allowed for) 
should be made criminal, unless a bona fide competitor actu- 
ally sells at this or a lower price in the same or substan- 
tially the same quantities. These great corporations are cre- 
ated by the state. Their rights to do business are derived 
from the people. They are supposed to serve all the people 
alike. They are incorporated because they are supposed to 
be of service to the people at large. They are subject to 
limitations by the popular will. Such regulations as sug- 
gested are consistent with the theory of corporations and 
the purposes of their formation. If trusts were forbidden 
by law to sell their product at any point for a less price 
(difference in transportation and rent and other local con- 
siderations being allowed) than they sell it at all other 
points — if when they reduce the price to kill one small 
competitor they were obliged to reduce it wherever they 
had competitors, this cut-throat competition method of ex- 
terminating rivals, the sole purpose of which is to obtain 
a monopoly and the power of extortion, would be one that 
would be far less frequently employed. Akin to the method 
of selling below cost in one locality in order to exterminate 
the rivals of the trusts, is the practice of the great trusts, 
that make many articles or many styles of the same article, 
to refuse to sell any of these articles, to the retailer unless 



126 The Trusts 

he will agree to buy exclusively from them. The effect 
of such an arrangement is to destroy the trade of the feeble 
competitor who makes but one article or one style. Such 
has been the method employed by the tobacco trust. If 
these great corporations whose powers are derived from the 
people and who are given the right of incorporation by the 
people only because it is believed that indirect benefits of 
great value will accrue to the people, were compelled by 
law to sell their products to any person tendering them the 
price, just as common carriers are bound to serve all at the 
same rate, — if such a statute could be enacted and en- 
forced, — potential competition would be a far more power- 
ful force. 

The great weakness of potential competition is, how- 
ever, that it is an uneconomic remedy. Potential competi- 
tion is worthless if it is never to become active competition; 
but in scarcely an industry has a trust been formed where 
the productive agencies — the factories and mills — merged 
into the trust did not have a capacity in excess of the con- 
suming power of the public; and nearly all of our trusts, as 
has been noted, have absorbed all or nearly all of those 
productive agencies. If they unduly raise prices, al- 
though competition will doubtless eventually appear, yet 
it is absolutely certain that the potential competitor will 
hesitate a very long time before entering into active com- 
petition, for he knows that there is no need of new fac- 
tories; and that the demand of the public will not sustain 
both the new factory and the old factory; and that in the 
competitive struggle either the new competitor or the trust 
Will fail, or else the trust will absorb the new competitor 
and form a new combination, and then place the price high 
tnough so as to recoup the loss due to the previous struggle 
of competition. This knowledge of the potential competi- 
tor thai there is really not room for a new establishment in 



Prices and Potential Competition 127 

the industry is also knowledge possessed by the trust man- 
agers; and knowing that, they realize that even although 
they raise their prices somewhat above the fair profit mark, 
yet there is a very powerful restraint upon the establish- 
ment of new competition, entirely independent of the re- 
straint that springs from the would-be competitor's knowl- 
edge that, if he enters the struggle, he will be met with cut- 
throat competition by the powerful trust, and independent, 
too, of the would-be competitor's knowledge that even if 
cut-throat competition is not attempted, yet the trust will, 
when competition asserts itself, at least, reduce its extor- 
tionate prices to the level of fair profits. The mere aggre- 
gation of capital, even although that aggregation possesses 
all of the productive agencies in any one industry and even 
although those productive agencies are more than able to 
satisfy the public demand, probably does not in itself con- 
stitute a monopoly. It is not the aggregation that stops 
the establishment of new competitive enterprises, but the 
fact that the total capacity is in excess of the demand. The 
existence of a number of productive agencies having a 
capacity in excess of the demand is always a restraint upon 
competition. If they are separately and individually con- 
trolled, the restraint upon competition is probably fully as 
much as if they were all combined into one trust. Indeed, 
experience goes to show that persons would rather start 
new establishments in industries in which there are trusts, 
if they could be sure that the trust would not resort to 
" cut-throat " or unfair competition, for prices would be 
more apt to be kept stable. But the vital fact remains that, 
whenever in a given industry the productive forces have 
a capacity in excess of the demand, the establishment of 
new competitive concerns is not only unneeded, but there is 
a restraint upon it. Granting that this is as true when the 
various mills and factories of the industry are separately 



128 The Trusts 

owned and managed as when they are combined and con- 
solidated, the further momentous fact remains that, in case 
of a consolidation, under such circumstances, of all the 
factories and mills in operation, there is the possibility, by 
reason of the union, of the exercise of monopolistic powers, 
because active competition has been restrained and, new 
competitive establishments being unneeded in order to 
supply the demand, potential competition is, therefore, a 
weak corrective force. When the sugar trust was known 
to have in its refineries a capacity four times as great as 
the consumption, is it to be wondered that people long 
hestitated about starting competing refineries, even al- 
though the sugar company for many years paid twelve per 
cent dividends upon its common stock and seven per cent 
upon its preferred, and although it was known to be capi- 
talized for much more than its cost? Supposing the whisky 
trust had extortionately advanced its prices, would it not 
have been business folly for a person to establish a new dis- 
tillery, when the whisky trust had been able to close almost 
six-sevenths of its distilleries and yet had been able to fur- 
nish with the twelve that it continued to operate the same 
output as before had been actually produced by the entife 
eighty that it owned? Is it not because the would-be com- 
petitor fully realizes that the Carnegie Company and the 
other great steel companies control mills and plants that 
can easily supply the average demand of the public, that so 
little competition springs up in that business, notwith- 
standing it is asserted upon good authority that the Car- 
negie Company, with its plants costing not more than $25,- 
000,000, will make from $25,000,000 to $40,000,000 net 
profit in this one year? Is not one reason that the 
Standard Oil Company has so little competition, not- 
withstanding its dividends amount to thirty or forty mil- 
lions of dollars each year upon a watered capitalization of 



Prices and Potential Competition 129 

one hundred millions, the fact that the Standard Oil Com- 
pany has ample facilities for supplying the whole country 
and the export trade with oil? 

Yet, while there is this restraint upon competition, 
caused by the existence of more plants than are needed, it 
is a fact established by experience that sooner or later there 
will be men with enough daring, enough courage, and 
enough hopefulness to start new competing establishments. 
As long as wealth keeps on increasing this is bound to occur, 
because men will put their money into some enterprise and 
they will put it into that which seems to yield the greatest 
profits. For a time they may be restrained from putting it 
into enterprises which trusts appear to have monopolized, 
but eventually they will do so; and the higher the price 
charged by the trust the more speedy will be the 
relief of competition. But the State, through its 
legislature, has a right and, in fact, owes it as a duty to 
itself to stop even temporary monopoly; and if the only 
practical means of doing so is to forbid such aggregations 
of capital as w T ill absorb all the productive agencies of any 
industry, then that means should be adopted. This is the 
only justification for anti-trust statutes which aim to abol- 
ish and not to regulate combination. Possibly in view of 
the fact that competition is bound to spring up, and that 
perhaps in the long run we may be gainers, it is unwise to 
go so far as to abolish trusts. But the evils of even a tem- 
porary monopoly are so great that the question is worthy of 
profound study. If, indeed, trusts that merge into one 
organization all the productive agencies and secure the 
means of supplying the entire demand, thereby restrain and 
hamper and repress the establishment of new enterprises, 
then it is possible that even publicity will not be a perfect 
remedy; that, while it may ultimately call competition into 
existence, it cannot do so to correct present evils, although 



130 The Trusts 

our experience so far would indicate that publicity was 
a speedier and more effective remedy than an appeal to the 
courts to enforce anti-trust laws. If aggregations of all 
the productive agencies, having the power to supply the 
entire demand, and for that reason dissuading men from 
entering new competitive enterprises, can acquire tem- 
porary monopoly, then the prohibition of over-capitaliza* 
tion and of dishonest corporate methods, and the imposi- 
tion of taxation, and the fullest publicity, while they may 
save us from a vast majority of the evils of trusts, will not 
save us from undergoing for a time, at least, its monopo- 
listic- evils. It is this restraint of competition which arises 
whenever it becomes known that existing productive agen- 
cies are sufficient to supply the demand, and which enables 
one aggregation of all those agencies to be a monopoly for 
a time, at least, — it is this restraint which is a justification 
of laws against such all-absorbing combinations. It is this 
which makes it right for us to treat such trusts as monopo- 
lies, and to require their dissolution, and also to demand 
the punishment of their organizers and managers. It Is 
this which is the basis of the New York statute against 
combinations and monopolies. 






CHAPTEE VII. 

TRUSTS AND THE WAGE-EARNER. 

Next to the accusation that they unduly and extortion- 
ately raise prices, the strongest charge in the indictment 
against trusts is that they have the power to reduce wages, 
and that when their supremacy is obtained they will ex- 
ercise this power. It is said that when a trust has obtained 
complete control of an industry, all the men engaged in 
that industry will be utterly at its mercy; that there will 
be no competitive demand for their services by others in 
that industry, for there will be no others; that in just the 
degree that they have become specially skilled in that trade 
or industry, they will find it difficult to turn their energies 
into other channels; that they must therefore take the 
wages which the trust will pay, or starve, — worse than that, 
see their dependents starve; that they will be white slaves. 
It is further said strikes will lose their effectiveness, unless 
universal, because the shut-down of one or two of a large 
number of factories will be of little injury to a trust, since 
it can undoubtedly in its other factories produce enough 
to satisfy the market. 

One thing must be conceded. Combinations of capital 
must be off-set by combinations of workingmen. If we 
are to have trusts of national scope, labor unions of na- 
tional scope are necessary; and such unions should be en- 
couraged rather than discouraged. If all over this country 
a combination of capitalists is to have the power or the 

131 



132 The Trusts 

legal right, speaking either as a combination of persons 
or as one corporate entity, by a single notice to reduce 
wages, the wage-earners should have an equal right to 
combine to demand higher wages, and to refuse to work, 
and to urge and induce their fellow workmen to refrain 
from working, unless those wages are paid. This may be 
common-law conspiracy but it is common sense. The 
necessities of those dependent upon wages demand the ex- 
istence of such organizations, and necessity knows no law. 
If capitalists form national trusts, let the labor unions, too, 
become national if possible. Then let them act together 
as a unit in fixing fair wages for the whole territory. 

There are those who claim that the larger the concern, 
the greater the damage by reason of a shut down, and 
the greater the demoralization of the organization by rea- 
son of a suspension of work; that a strike or anything 
causing an interruption of business is as disastrous to a 
large enterprise as to a small one, if, indeed, not more so; 
that strikes are sure to bring into activity that which 
trusts dread more than any other thing, namely, competi- 
tion; that they furnish the opportunity for building up 
a rival business; and that for these reasons among others, 
trusts are more apt to grant the reasonable demands of 
labor than are mere individual industries. We do not 
believe that it is true that strikes will be as effective against 
large trusts as against individual competitors. The latter 
know for a certainty that a strike means that their com- 
petitors will surpass them; while the trust, if it controls 
all the plants of the industry, has only the fear of a possible 
competition, which can in few cases become established 
and active during the continuance of the strike. In fact, 
the very existence of the strike will deter competition, be- 
cause it leads men to believe that profits must be small if 
good wages cannot be paid. But trusts are by no means 



Trusts and the Wage-earner 133 

wholly free from the influences of strikes, and they are, 
furthermore, in a position where they can more easily 
afford to pay high wages than can competitive concerns. 
It is to their interest to get along harmoniously with their 
employees, and they are so far able to recoup what they pay 
out as wages that the probability is that trusts' will raise 
wages and add the increase to the selling price rather than 
run the risk of a strike. 

To the extent that competition is diminished, an em- 
ployer is better able to pay high wages. With active com- 
petition he is compelled to sell his goods at extremely low 
prices. It is well known that in many lines of business, 
this selling price hardly affords a profit; therefore wages 
must necessarily be kept at the lowest level. If a com- 
petitor, — a weak, struggling competitor, hardly able to keep 
in the struggle, — cuts down his employees' wages so that 
he may if possible eke out a profit, in time the stronger 
competitor will follow suit. Competition between pro- 
ducers means a constant attempt to get cheaper labor and 
material. The employer, if heartless, can do much to re- 
duce wages. The excessive competition that wipes out 
profits is the competition that wipes out the fund for the 
payment of fair wages. The consolidations that can effect 
economics of production, that can yield profits without 
extortionate prices, can give good wages and permanent 
employment. But independently of their ability to pay 
better wages because of their ability to produce more 
cheaply, if all the factories in a given industry are com- 
bined in a trust, the wages can be raised to a proper point. 
It simply adds to the cost of production and this is added 
to the selling price. It comes out of the consumer, not 
out of the producer. If not all, but nearly all of the fac- 
tories in any industry are absorbed in one trust, it makes 
it much easier for a union to deal with the owners Qi 



134 The Trusts 

offending factories, and much easier for the owners of in- 
dependent factories voluntarily to raise wages, because 
they know that the great trust will also pay good wages. 
Assuming that a trust is a monopoly and can fix prices as it 
chooses, it can afford to pay the highest wages, for they 
w T ill be added to the other elements of cost and recovered 
in the selling price. The highest rate will under such 
circumstances be apt to be paid because, assuming the trust 
desired to raise prices unduly, it would want to make high 
w T ages the penance or pretext for its exactions. 

As far as the trust affects wages, we firmly believe that 
the most likely result is that its owners will form an alliance 
with their employees, pay them increased wages so as to 
secure their good-will, add it to the cost of production, and 
increase the price so as to get for themselves a larger and 
perhaps an undue profit, but will at first give to the con- 
sumers no share in the great economies that the combina- 
tion effects. This is practically what has been done by 
the numerous " Trade Alliances " formed in England by 
Mr. E. J. Smith of Birmingham. In his alliances, em- 
ployers agree with their w r orkmen to employ only union 
men. They guarantee never to lower the wages then ex- 
isting. They promise to give them a portion of any in- 
crease in the selling price not occasioned by an advance in 
the price of raw material. This system does not, in itself, 
occasion any economies of production or management as 
do trusts; but if higher prices can be obtained, the work- 
men get a share of the increase. Higher prices are ren- 
dered possible only by securing the co-operation of all 
union workmen of the trade and by boycotting those not 
in the alliance. 

Wage-earners should not, however, always be satisfied 
with mere increases in wages which are added to the price. 
If wages arc increased fifty per cent and the price increased 



Trusts and the Wage-earner 135 

fifty per cent, in the long run the wage-earner may lose. 
Granting that trust owners would continue the course of 
increasing wages and adding to the price, they cannot per- 
manently do so. Such a course is likely in the lapse of 
time to break down of its own weight. In the end it may v 
prove ruinous to the trusts and to their employees as well 
as to the people at large. It will surely produce a decrease 
in demand, a lessening of production, the shut down of 
many factories, a loss of employment, a lowering of wages, 
strikes and every form of industrial suffering and social 
derangement. The raise of wages which is most beneficial 
to wage-earners is that which is an increase in proportion 
to the final cost or selling price. It is by no means con- 
tended that all increases of wages which are added to the 
price are in the long run of no benefit to wage-earners, or 
economically improper. There are thousands of instances 
where competition has so reduced profits that wages have 
been cut and goods have been sold at less than a fair 
profit. In all these cases wages should be raised and the 
increase added to the price. What we do claim is that an 
extortionate price, even though there be an increase of 
wages included in it, is not only harmful to the people, but 
may prove so to the wage-earners themselves. The two 
things which interest the workingman, however much he 
may think he is interested only in the one, are: first, an 
actual increase of wages; second, a price fixed by the manu- 
facturer on the product, which shall not be so excessive as / 
to lessen the demand. 

It is further to be borne in mind that a blow to labor 
in one industry is bound to affect labor in all industries; 
a harm to one class extends to all classes, producers and 
consumers, wage-earners and capitalists. Suppose the price 
of lumber or of building hardware is unduly increased; 
what happens? Less lumber sawed and planed and worked 



136 The Trusts 

up; fewer logs cut and transported; but more than this, — 
fewer houses and stores built. There is less work not only 
for the lumbermen and the loggers and the sellers of lum- 
ber, but for the carpenters and builders, the architects, 
the masons and helpers, the painters and plumbers. If 
men are out of employment in all these industries, do you 
think even those who are kept at work can obtain union 
wages? Some of these unemployed will seek work in other 
occupations, and this will tend to lower wages in these oc- 
cupations. But the evil will not end here. There will be 
less activity in the real estate market. With fewer build- 
ings there will be higher rents, and higher rents mean 
higher taxes. Every storekeeper, every marketman, every 
shopkeeper, every place of amusement, every institution 
of education, every organization for charity or for promot- 
ing religion, — everything that needs money will find fewer 
customers, fewer patrons, fewer supporters, fewer benefac- 
tors; — and will want fewer persons in its employ. 

That trusts have raised the wages of their employees 
is almost universally conceded. While some contend that 
the increase has not been proportionate to the increase in 
prices, yet that there has been an actual increase is almost 
universally admitted. Before the Chicago Trust Confer- 
ence, Governor Atkinson of West Virginia., in speaking of 
the claim put forward by trusts that they pay the highest 
rates of wages to their employees, said of this claim: 

" I think it is absolutely true. Trusts pay big wages because 
they employ none but high-grade men and women, which they can 
afford to do." 

Before the same Conference every effort was made to 
obtain the opinions of labor leaders. It is most significant 
that Samuel Gompers, the President of the American 
Federal ion of Labor, speaking from the standpoint of the 
laboring men, argued not so much for the abolition of 



Trusts and the Wage-earner 137 

trusts, as for the national organization and federation of 
labor. Like most students of the question of trusts, he 
was apprehensive of their power, but he did not go so far 
as to urge the complete annihilation of that which under 
control or regulation may perhaps be the means of Ameri- 
can industrial supremacy, and of raising American wages, 
and of ensuring the consequent prosperity of American 
workingmen and therefore of a large portion of American 
citizens. That he was of the opinion that the increase in 
the size of industrial combinations was not a menace to 
labor provided labor also organized, is evident from this 
remark: 

" There is no tenderer or more vulnerable spot in the anatomy 
of trusts than their dividend-paying function; there is no power 
on earth other than the trade unions which wields so potent a 
weapon to penetrate, disrupt, and, if necessary, crumble the whole 
fabric." 

On the same occasion M. M. Garland, ex-President of the 
Amalgamated Association of Iron and Steel Workers, said: 

" The position of the worker may become easier as the opera- 
tion of the trust proceeds; the example is set and the necessity/ 
widened for every man in their employ to unite in common or- 
ganization. The farmer, mechanic, laborer and business man 
alike will feel its effects for good or evil. . . . The right of work- 
men, in conference, to be heard through their own selection of 
representatives as to the rate of wages and as to the hours which 
the condition of trade warrants will become a fact, and the farce 
meeting now so often employed by capital as a prelude to the 
lockout in order to enlist public sympathy, will disappear under 
the melting rays of peaceful relations forced by a wider field of 
legitimate trade unions, and the conference settlement will take 
the place of the strike and lockout between employee and the 
corporate combination. . . . Thus far in this new day of trusts 
the workmen in rolling mills find their inclination is to treat 
with organization. The annual wage scales and agreement were 
presented by our representatives and conferences were arranged 



138 The Trusts 

promptly. An advance in wages, ranging from ten to twenty-five 
per cent in different departments, was secured, and further ad- 
vances in wages seem assured by reason of advance in prices of 
material and product, which is one of our agreements. A number 
of plants that had been operating as non-union and at unfair 
wages, were unionized by the wage rates being applied to them 
since they became a part of the trusts. I would not be under- 
stood to infer that there would not have been an advance in wages 
if the trust movement had not been on, nor do we think the price 
of material would have been less, for we note that in branches where 
trusts do not control, the greater rate of advance has occurred in 
material. That in this country a trust, or the trusts, could long 
maintain an unnatural or inordinate price for a material or a 
product is a remote contingency, for not alone would that cause 
other capital interested in the consumption of the product to com- 
bine on as large a scale and to become their competitor, but the 
fact remains that there is not an article produced in these modern 
times, but there are, or can be, adopted several substitutes for it, 
and the cost, as a rule, will not vary enough to permit any very 
great or long-lasting extremity to our needs." 

At the same Conference, David Boss, Secretary of the 
Illinois Bureau of Labor Statistics, said: 

" Men who profess to betray great apprehension for the rights 
and liberties of the people cannot truthfully contend that these 
various transformations (the consolidation of industrial enter- 
prises) have operated to abridge any of their privileges. On the 
contrary, there has been a steady and substantial forward move- 
ment. It has been further demonstrated that with each succeed- 
ing change there has come, not only a reduction in the cost of 
Life's necessities, but also an increase in the wages of human labor, 
with other improved conditions of employment. It would seem 
that our latest form of industrial organizations will prove no ex- 
< option to the rule, so far as toil's compensation is concerned, as 
wages in the skilled and unskilled occupations have recently ad- 
vanced fully 25 per cent. This upward movement in wages has 
not been entirely eonfined to products manufactured by the trusts. 
In a few lines of industry prices have been advanced considerably 
beyond the increase in wages — not on account of any trust in- 
fluence — but due to the inability of manufacturers to fill orders, 



Trusts and the Wage-earner 139 

many of them for foreign markets. When productive capacity is 
more fully developed prices will again decline, but, under the new 
system, not so as to seriously impair profits or affect wages. . . . 

" Great organizations have been formed for carrying on the 
growing business of the country. During this period the wages of 
workingmen have been increased and the hours of labor shortened. 
The application of sound principles in governmental affairs has 
aided in placing increased comforts within the reach of every 
wageworker in the land. . . . 

" The oil and railroad interests of the country have been singu- 
larly free from labor disturbances. As a matter of recent history, 
our most serious conflicts have been with interests that neglected 
to federate. Labor leaders will agree that better terms of employ- 
ment can, as a rule, be obtained from large than from small em- 
ployers. Why, then, should we fear the results of consolidation? 
It is the part of reason to encourage a tendency that will make 
possible higher wages, lower prices, and less hours of labor." 

Moreover it is claimed that trusts not only tend to pay 
higher wages, but that they give steadier employment. 
Uncertainty of employment is as baneful an injury as low 
wages. Indeed, it may be much worse. The great damage 
done to a plant by shutting down always makes manufac- 
turers endeavor to find an average rate of production that 
will enable them to supply the total demand and keep 
running constantly. The larger the proportion of the 
trade enjoyed by any one concern, the better it is able to 
foresee the demand, and to produce enough to supply it, 
without, however, over-producing. This is unqualifiedly 
true and there can be no question that trusts should, and 
generally do, give steadier employment than competi- 
tive producers. The rule has, however, many exceptions 
where unscrupulous managers of great corporations, in 
order to manipulate stocks for purely speculative pur- 
poses, either over-produce, or arbitrarily close factories in 
the face of an active demand. There are many, indeed, 
who claim that the greater the concentration of capital 



140 The Trusts 

and the larger the plant, the more injurious is a suspension. 
They point to the fact that not only does the suspension 
damage the plant, but what is infinitely worse, it demor- 
alizes the force engaged in managing and selling. They 
argue that since this force is usually well acquainted with 
the particular business in which it has been engaged, since 
it is located in so many places, since it is an organization 
so difficult satisfactorily to replace, a trust will do every- 
thing possible to retain it even when shut down; that 
the expense of retaining it is so great that every effort 
will be made to continue the business and employ these 
men profitably rather than pay them for idleness or lose 
them because unable to keep them busy; that the profit- 
able employment of the managing and selling force neces- 
sitates continuous running of factories and permanent 
work for wage-earners. , 

There is, at least, a grain of truth in this; and coupled 
with the superior knowledge of the great trusts as to pros- 
pective demand and trade, it renders it likely that under 
trusts workmen will have more constant employment than 
under a system of industry where there are many competi- 
tors whose factories have a capacity in excess of the de- 
mand, and whose knowledge of conditions does not enable 
them to correctly estimate the demand and to keep their 
factories running steadily. 

It is a very significant fact in connection with wages and 
their relation to the increase in size of industrial enter- 
prises that, as industry has tended to specialize, as the di- 
vision of labor has gone on and men have more and more 
become skilled in doing well some one piece of work that 
was in itself but a fractional part of an entire thing, co- 
operation and consolidation have become necessary; the 
cambmcd elTnrfs of i lie workers have produced a large 
output, there has been a greater abundance and variety 



Trusts and the Wage-earner 141 

of commodities, and laborers have gotten a larger share. 
Prices of the necessaries and comforts of life have lessened; 
yet wages have increased. They have increased not only 
in actual amount, but also in purchasing power. In the 
face of the inequalities of wealth that exist to-day and of 
the poverty and suffering that are not infrequent, the fore- 
going statement may seem untrue, but it is the conclusion 
reached by those who have made most exhaustive study 
of the wage question. That it should be so, follows from 
natural and economic laws, and is in accord with moral 
laws. By specialization, by adoption of labor-saving ma- 
chinery or improved processes or even of more perfect or- 
ganization, the laboring man is enabled to produce more 
cheaply. In the nature of things cheap production ulti- 
mately necessitates low prices and higher wages. It is 
easily seen how prices must be lowered. If they were not, 
the increased product could not be sold. It may not so 
easily be seen that higher wages are also a necessary result 
of cheap production, but they are. The cheapening of 
products, that is, the lowering of the price, means an in- 
crease in their consumption, enlarged production, more 
employment for labor, — higher wages. Even if it be granted 
that the increase in consumption is not exactly in pro- 
portion to the cheapening, that is, even although cutting 
the price of a particular article in two does not double the 
consumption or double the demand for labor, the increase 
is, nevertheless, very great, and sales and total profits are 
much increased. Moreover as production increases, the em- 
ployer obtains more money. His capital is augmented. 
Some of it may be consumed or wasted, but an increasing 
amount becomes productive capital seeking investment. 
As this amount accumulates it starts new industries and 
develops resources theretofore undeveloped; and the result 
is an increased demand for workers and higher wages. 



142 The Trusts 

A typical illustration of the cheapening of a product while 
there was an increase in work and wages, as a result of 
concentration and combination and enlargement of the en- 
terprise, is the cotton industry. The following paragraph 
quoted from Geo. Gunton by A. Le6 Weil in his excellent 
paper before the Chicago Trust Conference, summarizes 
some statistics collected by Gunton. 

" If it is true that the concentration of capital tends to diminish 
the cost of production and intensify competition, it follows that 
prices will fall or wages will rise, or both, in proportion as large 
enterprises supplant small ones. And this is what all industrial 
history shows has taken place. Take for example the cotton in- 
dustry in this country. In 1831 there were 801 cotton manu- 
facturing establishments with an average capital of $50,702 each. 
. . . The ratio of consumption of cotton cloth to population was 
5.90 pounds to one (that is, 5.90 pounds to each inhabitant), and 
the price of cotton cloth seventeen cents per yard. In 1880 the 
number of establishments had fallen to 756. The average amount 
of capital invested in establishments had risen from $50,702 to 
$275,503; . . . the ratio of consumption of cotton cloth to the 
population was 13.91 pounds to one, and the price of cotton cloth 
was seven cents per yard, and wages were eighty per cent higher. 
Comparing 1880 with 1831, the capital invested per spindle was 
over one-third less, the number of spindles operated by each 
laborer nearly three times as large, the product per spindle one- 
fourth greater, the product (in quantity) per dollar invested twice 
as large, the product per laborer employed nearly four times as 
great, the price of cotton cloth sixty per cent less, wages eighty 
per cent higher, and the consumption of cotton cloth per capita of 
the population over one hundred per cent greater. These are the 
results of the process of consolidation into large capitals, extend- 
ing over half a century. What is true of this industry is equally 
true of all industries in proportion as the concentration of capital 
has increased." 

But while these figures show that from an enlarged 
product there come, as a result, cheaper goods, lower 
prices and higher wages, and while undoubtedly this cheap- 



Trusts and the Wage-earner 143 

ening of product could have been occasioned only by con- 
solidation and by an increase in the size of factories, yet 
have we sufficient proof to establish the proposition that 
a consolidation of all the cotton mills would have neces- 
sarily resulted in the same way? The figures are of great 
importance and deserve the most careful study; but in 
drawing inferences we should not forget that despite the 
consolidation of cotton factories and their increase in 
capitalization, there were in 1880, seven hundred and fifty- 
six competitive factories. The concentration of capital in 
the cotton industry made possible a cheaper cost; but 
there was active competition, in this case at least, to oc- 
casion lower prices. 

It must be remembered that the cheapening of the price 
of manufactured articles means cheaper goods for the pro- 
ducers themselves, in so far as they are consumers of those 
goods. If the cheapening be generally extended to all 
classes of manufactured goods (and this, as a rule, has oc- 
curred), an actually smaller amount of wages may have an 
increased purchasing power and therefore be relatively an 
increase of wages. Specialization is either a new division 
of human labor, or the adoption of new and improved ma- 
chinery. In whatever way it manifests itself, it always 
means more abundant production. Nearly all products 
tend to grow cheaper, because inventive talent is continu- 
ally being exhibited in so many industries. Those which 
have the least tendency to grow cheaper are those in the 
production of which there is the least possibility of a divi- 
sion of labor and the least opportunity to use machinery 
and to concentrate and combine, viz., agricultural prod- 
ucts. Indeed, there has been, of late, a tendency for prices 
of agricultural products to increase. The report of the 
U. S. Senate Committee which investigated prices and 
wages from 1860 to 1891, and which considered two hun- 



144 The Trusts 

dred common products, manufactured as well as agricul- 
tural, found that wages had increased 68 per cent. The 
prices of one hundred and forty manufactured articles had 
fallen from 6 to 40 per cent. Fifty-eight articles had in- 
creased in price. The net decrease was 4 per cent. With 
one or two exceptions all of the fifty-eight products, the 
prices of which had increased, were agricultural or raw 
material products in which concentration of capital and the 
use of machinery had been very slight. By means of con- 
solidation, then, and concentration, wages had increased 
not only actually and absolutely in money (68 per cent), 
but more than that in their purchasing power. 

In considering the possibility of an increase or decrease 
in wages, one should never lose sight of the fundamental 
fact that the source of wages, the fund from which they 
are payable, is the product turned out by the labor that 
is to be paid. We do not mean to say that there is an 
absolutely fixed wage-fund. That is an exjrioded fiction of 
political economy. Wages may be increased by compelling 
employers to take a smaller share of profits, and allotting 
to the wage-earner a larger share. The economics of the 
wage question cannot be separated from social problems. 
American workingmen get better wages than European 
nations largely because they demand them. American 
public sentiment will not tolerate any degradation of 
American workmen. Thus Ave pass laws regulating child 
and female labor; and providing for factory inspection and 
control. Labor unions can do an amazing amount to in- 
crease wages by raising the social standards of the masses. 
Workingmen arc like everyone else in that the more they 
get, the more they want. If we once have worn good 
clothes, we want always to have good clothes to wear; if 
we have accustomed ourselves to a certain degree of civili- 
zation, we will never give it up, if we can help it. Every 



Trusts and the Wage-earner 145 

material comfort the workingman has, creates a desire for 
other comforts. Every privilege that he acquires is an in- 
centive to demand a further privilege, and if he uses it 
properly, it is a warrant for so doing. People to-day talk 
about the " uppishness " of domestic servant girls and the 
demands of labor unions. These demands may in individ- 
ual cases be unreasonable, but all our strikes and labor 
troubles are the growing pains of an enlarging liberty and 
a moving civilization. Well may we lament the" day when 
the workers do not want more of the world's comforts and 
more of its privileges. Wages increase because laborers 
are determined to have a share in the world's prosperity. 
They demand not the right of existence, but the right as 
men to live, and to live as men, — a life of industry, but also 
a life of refinement, of comfort, and of happiness; — a, 
plenty and a variety to eat, clothing suitable, sufficient and 
of good style; leisure for recreation; opportunity for edu- 
cation. 

Wages may, indeed, be increased by compelling the em- 
ployers to accept a smaller amount of profit, but the most 
certain and sure method of increasing wages is to increase 
the product, for then there is a greater fund from which 
compensation can be drawn, and whatever tends to increase 
the product, — whether it be a machine, a process, or a form 
of business organization, tends to increase wages. If a 
body of laborers make a thousand pairs of shoes a day and 
receive a certain rate of wages from their employer, they 
in effect receive a portion of the shoes which they make. 
If, by means of a better organization, they can double that 
product, while undoubtedly the amount of their wages 
cannot be doubled in dollars and cents, because of the lower 
price that shoes will bring, yet it is certain that those 
wages will be greatly increased. If under the first con- 
dition they receive one-third of the product in shoes, or 



146 The Trusts 

its equivalent, the employer can equally as well afford 
to give them one-third of the product under the new sys- 
tem of organization; that is, twice as many shoes. The 
laborer in the shoe factory can have twice as much to 
offer as he had before. The increase in the number of 
shoes made by him and which must be sold will make an 
increase in the productions of many other persons. It will 
cause the use of more hides, make necessary the raising 
of more cattle, give employment to more tanners and 
leather merchants, and renewed activity to all the manu- 
facturers of subsidiary parts of shoes, such as shoe pegs, 
shoe thread, shoe buttons, and dozens of other articles tha't 
enter into the manufacture of shoes. Thus all these people 
will have the means of getting more shoes, but they will 
want hundreds of other articles besides shoes, and in pro- 
portion as their means to give something in exchange have 
increased, their desires or demands or consumptive powers 
will have increased, and these consumptive powers will mean 
increased activity in every other industry, and increased 
production. The product will be divided eventually among 
the producers. The laborer in the shoe factory will not 
need twice as many shoes, but he will be able to exchange 
these shoes for a greater amount of sugar and coffee and 
flour and other food products, and for more clothing, and 
for a greater number of means of amusement and enter- 
tainment and education, than he would have obtained had 
he and his fellow workers continued, under the original 
method of organization, to have made only the thousand 
pairs of shoes. 

The conclusion of the whole matter, then, is this, — what- 
ever increases the amount of product is sure eventually to 
increase the fund from which wages can be paid; and, 
without an exception, history shows that in the distribution 
of the fund, the wage-earners have continuously received 



Trusts and the Wage-earner 147 

a larger and larger proportion. Every invention, every dis- 
covery, every process, every machine, every method of or- 
ganization which cheapens the product, stimulates the de- 
mand for it and increases the amount of work and raises 
wages. The truth that should never be forgotten by the wage- 
earner is that the amount of his wages will depend not so 
much upon the number of employers, as upon the amount 
of work there is for him to do. If there are hundreds of 
competitors and their processes of production are expensive, 
then there will be comparatively little work. If there are only 
a few competitors, but if those few can produce cheaply, the 
amount of work will increase and wages will rise. 

We must never lose sight of the fact that the increase 
in the demand which gives more employment and higher 
wages is due not to cheap production, but to lower prices. 
Cheap production, economical production, always tends 
to displace labor and to throw it out of employment. It is 
lower prices, lower relative prices, alone that can in- 
crease the demand and stimulate production and in this 
way give new employment and keep up wages. Again we 
are impressed with the momentous, yes, awful danger of 
trusts, if, notwithstanding their power of cheap produc- 
tion, they attempt to exercise monopolistic powers and 
fail to lower prices in accordance with the cheapening 
of production. They cannot permanently charge undue 
prices; that is absolutely certain. Competition is sure 
sooner or later to arise and cut down their prices; but 
even temporary extortions, short periods of over-charging, 
mean diminished consumption and " shut-downs," lack of 
work, low wages, strikes, quickly alternating periods of 
spasmodic business, periods of activity followed by seasons 
of depression, stagnation and bankruptcy. The absolute 
importance, then, of attempting in every way to remove 
the obstacles in the way of fair competition, of prohibit- 



148 The Trusts 

ing the unfair trust methods of " cut-throat " competition 
in certain localities while over-charging in others, of 
abolishing all special privileges to trusts, of crushing out 
every trust that is a practical monopoly, — should never be 
forgotten by the wage-earners. 

On the other hand, to abolish entirely every large in- 
dustrial organization would be to re-open the flood gates of 
excessive competition and to expose ourselves again to all 
its evils. It would be to go back to expensive methods of 
production, which would lessen the demand and the out- 
put, diminish the amount of labor required, close up many 
factories and mills, cause others to work half-time, neces- 
sitate paring down wages, and produce one continued era 
of depression, until the sane and sensible method of adopt- 
ing all cheap means of production and distribution was 
adopted. It would reduce the United States to the indus- 
trial condition of Spain and Turkey and all countries 
where labor-saving machinery and methods are not adopt- 
ed. To-day we are in competition with European coun- 
tries that have cheap labor, and with Asiatic countries, not- 
ably Japan, that have still cheaper labor. Unless we adopt 
all the labor-saving machinery, all the newest and most 
improved processes, and also the most perfect labor-saving 
and cheap-producing methods of organization, we shall lose 
our foreign trade. It is only by these means, which will 
enable the thousands of American workmen, who receive 
good wages, to turn out as much as the larger number of 
European or Asiatic laborers whose aggregate wages 
are the same, that we can hope to obtain a foreign market. 
Granting that we could by a tariff retain the home market, 
— unless we adopt the cheapest means of production we are 
industrially and commercially ruined, because the capacity 
of our factories is far in excess of our consumptive powers. 
It is absolutely necessary that we stifle every trust that is 



Trusts and the Wage-earner 149 

a monopoly, but the abolition of every great industrial 
corporation would seem to be a bad policy. Kegulation, 
rather than destruction, of corporations, is what the wage- 
earner needs. Particularly is it to the interest of the wage- 
earner to encourage the enactment of statutes that will 
require or promote publicity of the affairs of corporations, 
— the fullest publicity that can be had without revealing 
matters of private business. Let the world know that 
profits are unduly high and competition will eventually, 
in all likelihood, assert itself. Prices will be lowered and 
production increased with the increased demand. Let the 
world know that prices are high, but that wages are low 
or the hours or conditions of labor excessive, and the evils 
will at once be corrected. If that great moral force, which, 
in an age of selfishness and of laxity of morals, is still an 
irresistible force, does not assert its power, either in effi- 
cient factory legislation, in laws for arbitration, and in otlur 
statutes; or else in that silent but effective way of social 
ostracism, which even in business is powerful; or in that 
form of business boycotting that refuses to buy of those 
who would degrade labor; — if that great moral force does 
not assert its power, competition, at least, will spring 
up and give to labor greater employment and remunerative 
and fair wages. Evil loves darkness, and in the world of 
wickedness the ignorance of the intended victim is the 
power of the villain. Let wage-earners, then, see that that 
same publicity which they themselves court is required 
of trusts. 

The dangers that the laboring man apprehends, and his 
fear that there is a possibility of the lowering of wages 
by trusts, are not, however, confined to his belief that the 
trust is a monopolistic power that can arbitrarily reduce 
wages. He also fears that the economies of the trust per- 
mitting and even necessitating the discharge of many labor- 



1 50 The Trusts 

ers in every industry, mean that there will be great num- 
bers of unemployed, and that this will mean a lowering of 
wages. In the chapter on Displaced Labor we will con- 
sider this point at greater length; but it has been impossi- 
ble to treat of the subject of the arbitrary power of trusts 
to reduce wages, without touching upon it. 

Incidental to the question of wages, and of vital interest 
to the workingmen in considering laws affecting trusts 
and combinations, is the fact that the trust method of or- 
ganization of capital has the same purpose and is based 
on the same principle as labor unions themselves. The 
trust is formed to escape the evils of undue competi- 
tion; the union is organized because the American laborer 
does not want to be compelled to sell his labor at the 
price of the cheap pauper labor of Europe, or of the 
" yellow labor " of the Orient, or even at the price of the 
laborer who is willing to toil for wages that merely give 
sustenance and which do not permit him to enjoy any- of 
the comforts of American civilization. The labor union is 
a labor trust by the common law, and by the decisions 
of many of our courts it has been declared illegal as a 
combination in restraint of trade. As a matter of fact, the 
laws designed to prevent trusts have, as a rule, been ap- 
plied and enforced only against labor organizations; but a 
growing public sentiment is compelled to admit that only 
by effective organization and by united ^action can the 
laboring man raise himself up to his proper place in the 
community. If workmen were forbidden to organize, if 
each one was obliged individually to agree with the em- 
ployer as to the hours of work or rates of wages, the work- 
men of the country would become practically slaves. Their 
necessities would compel them to accept whatever was of- 
fered as wages. Such a condition of affairs would not only 
be debasing to the workmen, but to all society. We can- 



Trusts and the Wage-earner 151 

not abolish labor unions by statute. Modern enlighten- 
ment would never permit such an attempt. It recognizes 
unions as necessities. If necessities, they must be allowed 
to become effective. They must be permitted to become 
equally powerful with the employers. If the latter com- 
bine and consolidate and agree on the scale of wages that 
they will pay, the workmen must be permitted to combine 
and federate and amalgamate and agree on what they will 
take as wages. Society will not tolerate a law declaring 
labor unions to be conspiracies. Yet, so far, it has been 
found impossible, consistently, to prohibit the trusts or 
unions of capital, and to permit the unions of labor; and, 
as has been said, when it has come to the enforcement of 
laws against combinations, it has been the labor unions 
rather than the great corporations which have suffered. All 
the radical statutes that so far have been passed looking 
to the absolute abolition of trusts have borne more griev- 
ously upon the workmen than the capitalists. The rea- 
son for this has been, not so much a desire on the part of 
the courts to oppress the workmen or to favor capital, — 
for judges, like all other persons who have to appeal for 
popular support, prefer not to antagonize the masses, — but 
because, although the principle and the purpose of the un- 
ion and the trust are the same, the trust, that is, associated 
capital, is enabled by means of the corporation to become, 
not a combination, but a unity. The wage-earners may 
well take heed that they are not carried away by the clamor 
for the enactment of laws that will prevent all combina- 
tions. If they heedlessly do so, then, like Haman in the 
story of Esther, they may be building a gallows on which 
they themselves will be hanged; they may be sharpening a 
sword for their own execution; they may be building 
a Frankenstein that will crush its creator; they may be 
hurling a boomerang which will come back to hit them 



*>s 



152 The Trusts 

hard and to hit them often. It will be well for workmen, 
who are urged to destroy combinations of all sorts and 
sizes, to bear in mind the language of Mr. Garland, the 
ex-President of the Amalgamated Association of Iron and 
Steel Workers, in his address at the Chicago Trust Con- 
ference: 

" The working -people are appealed to in almost every state to 
urge the passage of some pet measure of certain representatives 
to law-making bodies, which proposes to crush out trusts and 
combinations. While it may be that labor unions do not possess 
the skill, cunning and capability of trusts to defeat the aim of 
the enactment, it is certain that in the application of such legis- 
lation, the final and only target has been the labor union. The 
record of neither state legislatures nor National Congress ever 
contained one breath of intimation that the anti-trust restrictions 
of combinations or the interstate commerce laws passed by these, 
could, in the least, interfere with the free and full exercise of 
the right of workmen to organize. Yet I make the assertion, 
without fear of successful refutation, that every one of these laws 
that have been passed upon and found constitutional by the courts, 
has been found to apply to organizations of labor; and that every 
such law now on the statute books will be so construed, not ex- 
cepting the much-mooted law of Texas or the one that came from 
Arkansas; and if either or both of them became federal enact- 
ments there would not be one small cluck left in the workman's 
eagle that has soared so valiantly through this hall for the past 
two days." 

Many of the anti-trust statutes have expressly excepted 
labor unions from their provisions. The bill recently 
passed by the House of Eepresentatives, amending the 
Sherman Anti-Trust Act of 1890, contained such an excep- 
tion. But in all probability it is unavailing. Similar ex- 
ceptions in state laws, relating to labor unions and to 
combinations of farmers, have been declared unconstitu- 
tional. 

At the Chicago Trust Conference care was taken to give 
due consideration to this important question, and a very 



Trusts and the Wage-earner 153 

able paper was read by a member of the Illinois bar, Mr. 
William H. Tattle. The laboring-man and all his friends, 
real as well as reputed, may properly give consideration to 
these extracts from this paper. 

" The legislator who would regulate trusts and at the same 
time not embarrass trades unions, should understand the dis- 
tinction, or lack of distinction, so far as the policy of the law is 
concerned between combinations of capital and combinations of 
labor. If the two are so closely allied in principle as to be sepa- 
rated with difficulty, every one interested should understand the 
matter, and be prepared to meet the difficulty, otherwise many 
radical measures, intended to root up the tares in the industrial 
field, will pluck up the wheat also. Striking examples of this 
have occurred, leading to unjust criticism of our judiciary and 
executive officers, because laws that were aimed at one class in 
industrial life, hit another class as well, and perhaps hit the other 
class first. We will take time to mention one illustration. In 
1890 a law was passed by Congress, entitled ' An act to protect 
trade and commerce against unlawful restrictions and monopolies.' 
It provided that ' every contract, combination in form of trust or 
otherwise, or conspiracy in restraint of trade or commerce, among 
the several states or with foreign nations, is hereby declared to 
be illegal/ The law was unquestionably aimed at railroads and 
monopolies, and intended to relieve the middle classes and labor- 
ing men. The laboring man, however, was the first to be affected 
by it; and it has even been so far-reaching as to make the railroad 
strike illegal, which subject we will discuss more at length here- 
after. It can readily be seen that unless we understand the situa- 
tion our somewhat frenzied demand for radical legislation to help 
the laboring man, may cause him to pray for deliverance from his 
would-be friends. 

" It may be safely stated as a general proposition, that the 
policy of the law recognizes no distinction between capital and 
labor in requiring freedom of competition. This was the rule of 
the English common law without exception, and is the rule of 
the present common law made up of decisions based upon princi- 
ples of public policy. In recent years, however, certain distinc- 
tions have been attempted by statute law, which we will notice 
later. A leading case. State vs. Stewart, speaks in common of 



154 The Trusts 

labor and capital as follows: 'The principle upon which the 
cases, both English and American, proceed, is that every man has 
the right to employ his talent, industry and capital as he pleases, 
free from the dictation of others; and if two or more persons com- 
bine to coerce his choice in this behalf, it is criminal conspiracy. 
The labor and skill of the workman, be it of high or low degree, 
the plant of the manufacturer, the equipment of the farmer, the 
investments of commerce, are all in equal sense property. If men 
by overt acts of violence destroy either, they are guilty of crime.' 
Mr. Tiedman, in his text-book on Commercial Paper, says: 'All 
combinations of capitalists, or of workmen, for the purpose of in- 
fluencing trade in their special favor by raising or reducing prices, 
are so far illegal that agreements to combine cannot be enforced 
by the courts.' In the case of Doremus vs. Hennessy, recently de- 
cided by the Illinois Supreme Court, this general language was 
used : ' No persons, individually or by combination, have the right 
to directly or indirectly interfere with or disturb another in his 
lawful business or occupation, or to threaten to do so for the sake 
of compelling him to do some act, which, in his judgment, his own 
interest does not require/ Those decisions, with many others, in- 
dicate that in the field of industry, capital and labor are partners 
of equal importance, endowed with the same privileges and sub- 
ject to the same restrictions." 

However much we may regret the recognition of these 
principles of law, and however much they may be opposed 
to a growing and enlightened sympathetic public senti- 
ment, the experience of the laboring men in the case of the 
strike of the American Kailway Union, conducted by 
Eugene V. Debs, should show that the proper course of 
procedure is for the workmen not to urge the adoption 
of laws against combinations until, indeed, some distinc- 
tion is recognized between combinations of labor and com- 
binations of capital; and it is doubtful whether any such 
distinction in principle exists. In his able paper Mr. Tuttle 
says that although thirty states have passed anti-trust laws, 
so far neither capital nor labor has been affected, for the 
reason that there has been no earnest effort to enforce 



Trusts and the Wage-earner 155 

them; but he shows, upon an examination of the statutes 
of these several states, that all of them, if given a natural 
construction consistent with their terms, would be as op- 
pressive to labor as to capital; and this is equally as true 
of the old law of Texas (1889) and the law of Kansas, as of 
the anti-trust laws of Missouri, Nebraska, New Mexico, 
Louisiana, New York, Indiana^ Georgia, Arkansas, or any- 
other state. 

In some of the anti-trust laws, as in those of Illinois, 
Arkansas, Georgia, and Indiana, labor unions are specifi- 
cally excluded from their operation, but a decision of the 
United States Circuit Court in the north division of 
Texas in 1897, decided that the Texas anti-trust law of 
1889 was unconstitutional as class legislation, because 
among other things it excepted from its provisions, restric- 
tions of competition in agricultural products or live stock 
while in the hands of the producer or raiser. Consistency 
would seem to require a construction to the effect that an 
exemption of labor unions from the provisions of the 
statute was also class legislation and therefore void. 

We do not wish to be understood as maintaining that 
there is no distinction between labor unions and trusts, 
for we think there is one of vital importance. Both are 
formed because of the desire to eliminate a detrimental 
competition; but they differ in this important respect, that 
the labor union admits to its membership all the workers 
in a particular industry; none have special privileges; and 
it has been well said that the union represents the move- 
ment of the mass of the people for economic justice and 
social advantage. But the wage-earner must never forget' 
that in the eye of the law, and according to the declara- 
tions of many of the courts, there is no distinction between 
combinations of labor and combinations of capital. 



CHAPTER VIII. 



TRUSTS AND DISPLACED LABOR. 



The man who makes two blades of grass grow where one 
formerly grew has been declared a world's benefactor. 
Much greater, then, ought to be the encomium pronounced 
upon the person who, by perfecting a tool, inventing a ma- 
chine, or organizing industry, causes one man in a given 
time and with a given amount of labor to do the work 
which formerly required two men; for the community at 
large can have, as the result, twice as much of that product, 
or else it can have something else that one of the two 
men can produce. To the community, the saving — es- 
pecially when considered only abstractly — seems an advan- 
tage. " Why," says it, " should two men be paid when 
one can do the work?" Sometimes there is another 
thought which comes to the community: " Is it really a 
good thing for us, the community, that the second man 
should lose his employment?" " He is out of employ- 
ment, and it seems as if he never could again get work." 
In time the community learns that all the displaced em- 
ployees have found employment again, either in the same 
industry or in some other; and the community sees that it 
is, in fact, good; that it is inevitable. The thought that 
comes second, if at all, to the community, is, however, the 
first thought of the displaced employee; namely, the hard- 
ship suffered by him. This displacement of labor is the 
inevitable incident of labor-s*ving machinery and labor- 

156 



Trusts and Displaced Labor 157 

saving organizations. It is the absolutely necessary ac- 
companiment of industrial progress. There is no advance 
without someone or something being displaced in the move- 
ment. This is as true of industrial progress as of physical. 
The more rapid the progress the more sudden the displace- 
ment. The extent of the displacement is, indeed, the real 
measure of the progress — the saving, the benefit. The dis- 
placement of labor is one of the most pitiable of all the at- 
tendant evils of industrial progress because it is generally 
the most skilled that are displaced. The more one has 
specialized, the more it is likely a machine will be invented 
to do his work, and the more it is difficult for him to find 
work in some other industry. 

Every labor-saving device, whether it has been an inven- 
tion of machinery or a betterment in organization, has been 
fiercely opposed by those who were about to be displaced. 
The history of industrial progress is a record of hostility 
and opposition to improvements, inventions and innova- 
tions. Manual labor has always been the enemy of the new 
machine. Arkwright and Hargreaves and Crompton were 
mobbed by the hand-weavers, and in the latter half of the 
eighteenth century mobs went through England breaking 
down power-machines. The introduction of nearly every 
new machine has been fiercely resisted and loudly lamented. 
One need not wonder at the opposition of the laborers. No 
man loves that which takes the bread out of his mouth and 
the mouths of those whom he loves and whom he must 
feed; and this is what the machine appears to do, 
and for a time does do. But it would be better for 
the laboring man if he formulated, in some way, 
his claim upon the community for the loss he has 
suffered, and made a reasonable demand that the com- 
munity, out of the great saving accruing to it and to the 
introducer of the machine, would pay something to the 



158 The Trusts 

skilled laborer whose skill has been rendered useless, and to 
the faithful employee for whom there is no longer work. 
It might be possible for the community by some plan to 
assuage in some degree the suffering occasioned to the in- 
dividual by these new methods. The community ought 
not to overlook the great wrong done to the displaced. 
They are the victims over whom the chariot of progress 
ruthlessly rides — the victims of industrial campaigns. We 
pension our soldiers in war. Can we pension the injured 
veterans of industry? No scheme has ever been devised 
to compensate workmen displaced by machinery or by im- 
proved methods of organization; probably no scheme can 
be devised; but this much is certain: the most senseless 
proposition would be to prevent the introduction of im- 
proved machinery or better organization. It would be 
infinitely cheaper for society to pension displaced em- 
ployees — to pay them for all their lives the wages they have 
been receiving, for this, at the most, would only delay .prog- 
ress one generation. Perhaps there is no other course than 
for the displaced laborer to adapt himself as readily as pos- 
sible to the new condition. Perhaps there is no way of re- 
lieving the hardship of the displaced man. But, however 
practicable or impracticable any scheme of relief, the march 
of progress cannot be stopped. Labor-saving devices and 
labor-saving organizations will be adopted because they are 
a benefit to the community and eventualjy to all classes and 
industries; — because they are the greatest good for the 
greatest number, and finally the greatest good to all. 

Trusts do, indeed, close many factories and mills, and 
throw, temporarily at least, many men out of employ- 
ment. They would not be cheap producers if they did not. 
They are labor-saving organizations. Their real econo- 
mies grow out of the fact that the same work, by means of 
great centralization, can be done by fewer men. Little 



Trusts and Displaced Labor 159 

shops which cannot produce cheaply are necessarily closed, 
either because they cannot compete against the trust, or 
because if absorbed by it they cannot be run economically 
and profitably. The men who were employed in them are 
for this reason no longer needed and are therefore dis- 
charged. Thus when the cotton-oil trust was founded, it 
closed more than a dozen small old-fashioned mills. The 
whisky trust, immediately after its formation, closed sixty- 
eight of its eighty distilleries, but with its remaining twelve 
it was able to furnish the same output as before, and soon 
to increase it largely. The sugar trust, it is said by Ernst 
Von Halle, can supply the entire market with the product 
of one-fourth of the plants which it has absorbed. To 
oppose the closing up of these unnecessary plants would be 
the height of folly. If the community had a right, 
directly or indirectly, to compel the whisky trust to keep 
on running the sixty-eight distilleries that it closed, in 
order that the men who were employed in them might not 
be thrown out of work, and in order that the towns 
and cities in which they were situated might not lose 
business industries, why not insist that the whisky 
trust should increase its distilleries from eighty to 
three hundred or to five hundred, in order to give more 
work, and more industries to more towns? The truth is 
that the industries that were closed were unneeded; that the 
services of the men who were discharged were not required. 
The further truth, which is the important truth, is that 
every cent that is paid for these unnecessary services, or to 
maintain these unneeded plants, is a burden which is finally 
borne by the consumer. Its voluntary continuance would 
be folly. To compel its continuance would be a crime. 
When one laments the closing of factories and mills by 
trusts, he should, however, never lose sight of the fact that 
under the competitive system men are very frequently 



160 The Trusts 

being thrown out of work. Factories and mills are con- 
stantly being closed. Commercial travelers are every now 
and then losing their places. If the reports of the com- 
mercial agencies, which show that eighty per cent of busi- 
ness men fail at some time or other during their business 
careers are correct, then it is certain that at some time or 
other a large portion of the factories and mills of the coun- 
try are closed and a majority of the employees are thrown 
out of work. 

It is the belief of disinterested students and observers 
that without the formation of trusts, the small and weak 
industrial establishments would have been forced by com- 
petition to have suspended, and that even a greater num- 
ber of plants would have been closed, and a larger number 
of men thrown out of employment. Absorption by the 
trust has enabled the trust with its various economies to 
save the proprietors from ruin, if not to give employment 
to all the workmen. Ernst Von Halle states, as his opinion, 
that even if no whisky trust had been formed, the natural 
conditions of production, such as the price of real estate, 
of wages and of grain, and the rates of transportation, 
would have given to the distilleries situated in Peoria, 111., 
such an advantage that most of the distilleries in other 
places would in the course of time have been obliged by the 
force of competition to go out of business; that the sugar 
refineries of Havemeyer and Spreckels were so much 
better equipped than those of their competitors, and their 
owners had the possession of so many valuable patents, 
and by reason of them and by reason of pos- 
sessing great capital and experience, were enabled to pro- 
duce so much more cheaply than their competitors that 
they were bound in the course of time to acquire nearly all 
the trade, and their competitors in all probability were 
destined to bankruptcy and failure; that long before the 



Trusts and Displaced Labor • 161 

Carnegie Co. was formed in this year, 1900,, Mr. Carnegie, by- 
reason of his capital and ability, was so much stronger than 
all his competitors that they, for their own protection and 
preservation, entered into pools with him; that, if it be urged 
that the terms and conditions of these pools were oppres- 
sive to the smaller concerns in them, it is but additional 
proof that the owners of these smaller concerns were so 
afraid of bankruptcy and ruin that, even upon unfair terms, 
they were willing to enter the pools in order to be able to 
continue business at all. / 

One class of persons greatly affected by trusts is that 
known as " commercial travelers." Competition among 
sellers for many years mightily increased the number of 
commercial travelers. The more intense that competition 
becomes, the greater is the need of the services of this 
class to " drum " up trade, to exhibit the " line carried," 
to customers. The commercial travelers are among 
the most active, aggressive, and public-spirited of Ameri- 
can business men. The success of competing estab- 
lishments depends very largely upon these represent- 
atives. They make the fortune of many a mercantile 
house. Each one has his " trade," — a good will whicH 
is most valuable. Naturally, commercial travelers, are 
not, as a rule, low-priced men. Their salaries and their 
expenses constitute a very large percentage of the cost of 
business; they are one of the largest items that go to make 
up the cost price to the retailers. As soon as all the com- 
peting industries are formed into one combination there is 
no longer the necessity to solicit trade to the same extent, 
and the commercial traveler becomes needless. He is 
dropped. To just the extent that the trust can dispense 
with his services does it effect a saving. The greater the 
number of men whose services are dispensed with, the larger 
the saving. Mr. P. E. Dowe, president of the Commercial 



1 62 The Trusts 

Travelers' National League, has strongly arrayed himself 
against trusts. He shows how commercial travelers have 
lost their places owing to trusts. In a speech at the Chi- 
cago Trust Conference in September, 1899, he spoke as 
follows : 

" There have been thirty- five thousand commercial travelers 
thrown out of employment, mostly traveling salesmen, but in part 
city salesmen who come under the title of commercial travelers; 
for the man who picks up his gripsack and drums city trade, or 
invites customers to his headquarters to inspect his samples, is a 
commercial salesman, or a commercial traveler, by a slight elas- 
ticity in the use of the name. A city salesman is eligible to 
membership in any of the commercial travelers' associations. The 
majority of city commercial salesmen make out-of-town trips occa- 
sionally, sometimes short distance, sometimes long distance jour- 
neys. I neglected to note in previous arguments this subclassifica- 
tion; it is unimportant, however, as the city men are but a small 
proportion of the whole number affected. 

" I stated in Washington in June last that twenty-five thou- 
sand were reduced in salaries. Could add to-day a thousand to 
these figures. I was in error when I anticipated, on the 16th of 
June, that thousands more of the commercial travelers would be 
dispensed with on July 1st; for, from reasons best known to the 
trust officials, expected wholesale discharges did not take place. 
I have heard from less than one hundred discharged on that date, 
but have been notified of many cases of reduced salary. Reduc- 
tion in salaries was not exclusively with trusts; many of the 
1 outsiders,' owing to the pressure of unfair competition and loss 
of trade, were obliged to make reductions. 

" The salesmen who lost positions, owing to the trusts, were all 
good men; being of the energetic and progressive character pro- 
verbial to the American. They could not be discovered as tramp- 
ing the streets wearing signs of distress. Nearly every one of them 
had some money saved; some found positions as travelers for 
other houses; some went into other pursuits; some had farms, 
and I know of more than forty instances w T here former drummers 
are doing farm work; and some are still looking for positions." 

Mr. Dowe's statements contain some significant admis- 



Trusts and Displaced Labor 163 

sions; and it may be questioned — in fact, by the most emi- 
nent authority it has been questioned — whether his figures 
are reliable. They have been obtained, as he himself ad- 
mits, largely by means of correspondence and verbal re- 
ports, sometimes direct and sometimes round-about. They 
are really little more than rumors. They seem to be about 
as erroneous as were his anticipations of the 16th of June. 
But conceding that thirty-five thousand commercial travel- 
ers have lost their places, what is the conclusion that is to 
be drawn? It is that trust methods have at least saved 
the salaries and expenses of thirty-five thousand commer- 
cial travelers; that to that extent production has been made 
cheaper and lower prices rendered possible, while the en- 
ergy and force that are characteristic of these commercial 
travelers can now be directed into some useful channel 
through which they can render needed services to the 
world. 

It is unquestionable that trusts displace labor. If they 
did not render some services useless, they would have no 
advantage. But trusts would not have a sufficient reason 
for being, even if they could dispense with labor, if the 
displaced laborers were to remain permanently idle. No 
calamity would be greater than to have these thirty-five 
thousand alert, progressive, active Americans reduced to 
idleness. But they will not remain idle. They will ob- 
tain situations. It may be difficult for them to do so 
at once. In many cases the new positions may not be to 
their liking; but somewhere or other, in the great field of 
industry, there will be occupations and work for them. - 
And, however little all their experience and skill as com- 
mercial travelers will be availed of, doubtless, in general, 
the community will be better served by their efforts in 
these new places of employment than in the useless 
service of soliciting trade for producers who have com- 



164 The Trusts 

bined. Wherever machinery has been introduced, it has at 
first displaced employees and afterwards has so cheapened 
the product and increased the demand, that in that same 
industry there has been need of an increase in the number 
of employees. The result will not be different in the case 
of labor-saving and labor-displacing organizations. 

The cheapening of a product not only increases the demand 
for that product, but is sure to build up many kindred enter- 
prises, and in time to benefit every industry. One of the 
most conspicuous examples of this is the trade of printing. 
Few machines are so nearly human in the operations they 
perform, so automatic, as the modern printing press which 
takes a roll of paper, prints it on both sides, cuts it int5 
proper lengths, folds it and turns it out ready for mailing 
or delivery. Hardly any machine has displaced so much 
labor. One modern printing press will do more work to- 
day than five thousand men could have done on hand 
presses a century ago. But the press has reduced the cost 
of printing newspapers proportionately. Even with the 
increased amount of news that they furnish, gathered with 
amazing promptness from all quarters of the globe at great 
expense, they furnish papers of far greater contents, at a 
fraction of the cost of the old news-letter. But the increase 
of their circulation, and the amount and value of their 
advertising space, have more than kept pace with the re- 
duction in price. More printers have employment than did 
when old-fashioned presses were used, or would in case 
old-fashioned presses were used to-day. But not only are 
there more printers, — employment is given to hundreds of 
thousands of editors, reporters, contributors, newsboys and 
advertisement writers; and the businesses of manufactur- 
ing presses, founding type, making printer's ink, manufac- 
turing paper, etc., have given employment to hundreds of 
thousands more. 



Trusts and Displaced Labor 165 

This whole question of displaced labor is but one phase 
of the question of trusts and wages, and many things 
stated in the preceding chapter are answers to that 
question. Particularly should reference be made to the 
figures and statements concerning the increase in the 
number of persons employed in the cotton trade. It is a 
fact of common knowledge that in this industry there has 
been constant improvement of machinery, and that the 
adoption of this new machinery has constantly displaced 
labor; but an examination of the figures relating to the 
cotton industries shows that in sixty years there has been 
a great increase, not only in the amount of capital invested 
in the industry and in the product obtained, but also in 
the amount of employment and in the wages paid, w^hile 
the price is only one-third or one-fourth of what it was 
in 1830. 

Perhaps our great means of transportation, the railway, 
has done more to displace labor than any other modern in- 
stitution. It has displaced all the stage coaches with their 
drivers. It has resulted in the closing of most of the 
road houses and country inns with their proprietors and 
their hostlers and their servants. It has wholly displaced 
the canal packet; it has made unnecessary the building of 
stage coaches and in scores of ways has displaced labor; 
but it has given employment to hundreds where tens have 
been discharged. Take the great Pennsylvania railway sys- 
tem as an example. To-day it employs over one hundred 
thousand men. Half a million people are dependent upon 
these one hundred thousand. It is a statement which few 
will care to contradict, that the employees of the railway 
are to-day better paid, and that they work under more 
favorable conditions than did the men whom the railway 
has displaced. The stage-coach builder is practically out 
of business; but how vastly greater an industry is that of 



1 66 The Trusts 

building railway cars. How infinitely larger is the number 
of men employed in this industry than the number that 
was employed in stage-coach building. Think of the other 
gigantic industries that have been built up by the railways; 
think for a moment how railways have brought forth and 
built up the great steel industry, by their demand for rails 
and bridge materials and structural steel and locomotives. 
There can be no question that the number of people en- 
gaged in transportation now vastly exceeds the number of 
those engaged in the same business in the days of the stage 
coach, even considering and making allowance for the vast 
increase in the population. 

It may be said that railway companies are not industrial 
trusts. Well, then, take the Standard Oil Company. Sta- 
tistics showing the number of men engaged in that indus- 
try when the trust was formed and the number now en- 
gaged are not at hand; but to-day the Standard Oil Com- 
pany, although it makes at least $25,000,000 a year, pays 
out $125,000,000; that is, its annual volume of trade is 
$150,000,000, of which $25,000,000 are profits. These 
$125,000,000 go partly in payment of crude oil, but 
chiefly in payment of wages and the countless expenses of 
business. The Standard Oil Company has developed a 
foreign trade which brings in $60,000,000 a year. It is 
conceded even by its opponents that its employees receive 
high wages. 

A study of the United States census returns for 1880 and 
1890 will show that the increase in the demand for labor in 
those industries in which labor-saving machinery has been 
adopted has nol been confined to the Standard Oil Com- 
pany, tin- 1 ransportation business and the cotton trade. They 
are typical, not exceptional. Take the following figures, 
selected from a longer table appearing in George Gunton's 



Trusts and Displaced Labor 



167 



book, The Trusts and the Public, They all relate to in- 
dustries in which much machinery is used : 



Boot and shoe, cut stock , 

Boot and shoe, uppers , 

Boots and shoes, factory product 

Boots and shoes, rubber , 

Boxes, cigar 

Boxes, fancy and paper 

Boxes, wooden packing 

Cordage and twine 

Envelopes 

Furniture, including cabinet- 
making, repairing and uphol- 
stering 

House-furnishing goods, not else- 
where specified 

Iron and steel nails and spikes, 
cut and wrought, including 
wire nails 

Iron and steel pipe, wrought 

Iron work, architectural and 
ornamental 

Leather goods 

Oil, cottonseed, and cake 

Oil, lubricating. 

Printing and publishing 

Pulp, wood 

Silk and silk goods 

Steam fittings and heating appa- 
ratus 

Tools, not elsewhere specified — 

Wire work, including wire rope 
and cable 



Number of 
Employees. 



1880. 



2,885 
437 
111,152 
4,662 
2,365 
9,678 
7,722 
5,435 
1,204 



52,087 
592 



2,910 
5,210 

1,934 

1,036 

3,3)9 

413 

58,478 
1,209 

31,337 

2,474 
3,151 

4,459 



1890. 



Yearly 
Wages. 



1880. 1890. 



5,503 

1,708 

139,333 

9,264 

5,537 

19,954 

13,922 

12,799 

2,501 



78,667 
3,667 



17,116 
12,064 

18,672 
3,074 
6,301 
1,072 
165,227 
2,830 

50,913 

11,779 
7,095 

7,917 



$254 $422 



O M 

*3 <A 

c 9 

u 



389 
386 
315 
316 
245 
358 



417 
366 



431 
343 

436 
443 
265 
503 
522 
367 
291 

527 

472 

383 



525 
476 

428 
385 
344 
465 



286 354 

285 423 



547 
485 



456 

484 

640 
476 
302 
817 
635 
434! 
386 



a o 



$168 66.1 
136 34.9 



90 
113 

69 

99 
107 

68 
138 



130 
119 



25 

141 

204 
33 
37 
314 
113 
67 
95 



644 117 

584! 112 

503 120 



23.3 
35.8 
21.8 
40.4 
29.8 
23.7 
48.4 



31.1 
32.5 



5.8 
41.1 

46.7 
7.4 
13.9 
62.4 
21.6 
18.2 
32.6 

22.2 
23.7 

31.3 



Statistics thus go to corroborate the testimony of experi- 
ence and observation, and to confirm the proposition which 
abstract reasoning demonstrates, that, generally, in the 
course of time, the individual who has been displaced by 
labor-saving machines or organizations, finds a new place, 



1 68 The Trusts 

frequently in the same old occupation. It is only by the 
displacement of labor that labor itself can make any prog- 
ress. The ability to produce the same amount with less 
labor means cheaper production. Cheaper production 
means increased consumption, so that gradually the num- 
ber of persons employed in the industry tends to increase. 
The more we cheapen our product, the more we can en- 
large our market, foreign as well as domestic, and give work 
to our citizens. We cannot obtain a large market except 
we either pay less to our labor or adopt that which will ren- 
der it more productive. We can render it more productive 
only by longer hours — against which we protest — or else by 
introducing labor-saving machines or adopting labor-saving 
organizations. Either of the latter will displace labor, but 
at once the community will get cheaper commodities, and 
in time the worker will get more work and higher wages. 
Where is labor most poorly paid? Where there is the least 
machinery, the most antiquated processes, the most im- 
perfect organization of labor. This is as true of nations 
as of separate individual concerns. In the long run, in- 
dustry, well organized and well regulated, will be able to 
give more employment and more continuous employment. 
If the people of the United States do not want men thrown 
out of employment, they should adopt every labor-saving 
machine and organization, so as to produce cheaply and get 
the markets of the world. 

The introduction of machinery or improved organization 
will, however, permanently displace labor and irretriev- 
ably injure not only the men displaced, but the community 
also, and ultimately the introducer of the machine himself, 
or the man who perfects the organization, if prices are 
not lowered. For if the labor product be not cheapened, 
if the price be not lowered, there will not only be nothing 
tending to increase the consumption, but the idle laborers 



Trusts and Displaced Labor 169 

will cease to be consumers. They can no longer take their 
proportion of the goods manufactured with the machine; 
they will not be able to be purchasers of other products. 
There will be a glut of labor. Men who are starving will 
work for starvation wages. Not only will their own w T ages 
be low, but wages of everyone will be depressed. The con- 
sumptive power will be reduced, more laborers will be 
turned out of work, profits will diminish, manufacturers 
will fail, and with each downward step, disaster and de- 
struction will gather momentum. Prices cannot perma- 
nently be kept up; but while they are — and short-sighted 
selfishness is sure occasionally to put them up — all the evils 
mentioned will occur. 

Will manufacturers voluntarily reduce these prices as 
they introduce labor-saving machines, and adopt labor- 
saving organizations, or will they contend that they, and 
not the community, are entitled to all the saving? We 
have seen in an earlier chapter that cheap production even- 
tually results in a lower price. Competition in the past 
has compelled a reduction in the price when there has been 
a reduction in the cost. When one manufacturer has 
adopted a machine, if unpatented, some other manufac- 
turer has also soon adopted it, and the competition has 
reduced the price. As human nature exists it can hardly 
be doubted that if one of many manufacturers got hold 
of a machine that was labor-saving and cheap-producing, 
he would retain all of the saving he could. Where persons 
by a patent obtain exclusive control of a machine, they 
invariably do this as far as they can profitably. But even 
patents expire; and, furthermore, if there were no competi- 
tion, self-interest would to a certain degree restrain those 
possessing a cheap-producing machine or organization from 
exacting an extortionate price. They would reduce it just 
to the point where they could make the greatest profit; 



1 70 The Trusts 

not that their anxiety would be to give a low price, but to 
get a great profit. A street-car line that charges five cents 
will, in any ordinary American city, make vastly more than 
one that charges ten cents. The former will probably pay 
large dividends; the latter is very sure to go into bank- 
ruptcy. It is true that many owners may not comprehend 
their real and true self-interest, and may charge high prices 
to get great profits in cases where low prices would give 
even greater profits; but, in the main, the managers of these 
properties know even better than others the price that will 
yield the greatest profit, and whatever they think that 
will be, that they fix. In case there is no competition and 
no satisfactory substitute and the commodity or the service 
is a necessity, the price that will pay the greatest profit 
is not the price that will pay the fair profit. What we 
cannot get along without, we will pay the price for, eve:a 
though it is unduly high. There are some things in which 
consumption will not be diminished even by high prices, 
because we must have them regardless of high prices. But 
fortunately for the world nearly everything that is the sub- 
ject of barter and sale has a more or less satisfactory sub- 
stitute. It is because of this fact that cheap production 
will invariably result ultimately in lower prices, even 
though all the agencies of production be in the hands of 
the greedy and the grasping; because as long as there is 
any possible substitute, there will always be an opportunity, 
by lowering the price, to cause people to rfefrain from using 
the substitute. If there be no substitute, but if the article 
be not an absolute necessity, the lower price will win some 
custom and trade which the high price drives away. There 
is thus always a force tending to make the cheap producer 
lessen his prices and roach out for new markets and a larger 
trade. This results in giving more employment and in 
raising wages. Further, if the producer's profits by a 
new machine that produces cheaply, are raised, he acquires 



Trusts and Displaced Labor 171 

a large amount of capital, and this he must invest in some 
productive enterprise. As a consequence there is more 
work for the toilers. This is undoubtedly the inevitable, 
ultimate result. But it may be obtained only after long 
delay and many setbacks. There will always be greed and 
selfishness. Trust owners have their full share of these 
vices; — doubtless many trusts are inspired by greedy and 
monopolistic motives. Where such motives exist, true self- 
interest may be, for a time, at least, overlooked, and extor- 
tionate prices exacted. If so, there are sure to be, for a time, 
a lessening of the demand, a decrease in the output, a need 
for fewer workers, a lowering of wages, and wretchedness 
of the worst degree. If this policy is inaugurated there is 
no prospect, — at least as long as it is continued, — of dis- 
placed labor obtaining new employment; for instead of 
the demand being increased, it will be lessened; instead 
of the manufacturer making more money and having 
more capital to invest in new enterprises, he will have less. 
This will be the result until low prices come as a relief, 
and the longer that high prices prevail the harder will it 
be — the less able financially will the manufacturer be — 
to reduce prices. It is not perfectly satisfactory to say 
that if we will wait long enough, another policy than 
high prices will suggest itself, to trust owners as being not 
only to the interest of the public, but to the interest of the 
trusts themselves; or that, if the trust does not adopt this 
wiser policy, others will. The temporary hardship and 
suffering and extortion are things we should not be 
willing to endure. We want not only to escape eternal, 
damnation as the punishment for submitting to a per- 
manent monopoly; but we want our economic policy at all 
times to accord so fully with economic laws that our pen- 
ance will be slight. We want not only to avoid an ever- 
lasting hell, but to make our stay in purgatory as short as 
possible. 



172 The Trusts 

The awful evils, then, which result from the displacing 
of labor by the introduction of improved machinery and 
by the adoption of improved methods of organization, — 
evils which in the past have been turned into benefits and 
advantages, only because competition has made low prices 
follow low cost of production, and because in the wake 
of low prices have come increased consumption, greater 
demand, new employment, higher wages, — the awful evils, 
which, in the past, competition has turned into good, make 
the problem of trusts momentous. Can we rely on com- 
petition, real or potential? It seems clear that we can for 
ultimate relief; and equally clear that we cannot hope that 
it will stop all occasional extortions. If competition can 
not save us, then there must be control or restriction. If 
government control is impracticable or inefficient, and 
trusts are not subject to competition, then we must ren- 
der it impossible for trusts to become so large as to obtain 
the control of industries, in other words, absolutely for- 
bid vast combinations; and as to corporations, limit their 
capitalization; — lose the full benefit of trusts so as to avoid 
their evils. This is certainly the wisest policy if we can- 
not escape the monopolistic features of trusts, for monopoly 
in the end is national bankruptcy and misery. But shall 
we have to take these steps and adopt such a policy? That 
is the question of the age. Only one thing is certain and 
that is that as long as we look to competition to save us 
and still seek to have the economic advantages of concen- 
trated capital, we must make it possible for fair com- 
petition to exist; we must stop cut-throat competi- 
tion, and by publicity and honesty and fair dealing make 
active competition a power, and potential competition a 
force. Perhaps we can directly or indirectly hasten the 
time when trust? will reduce their prices in proportion to 
the lessening of the cost of production. 



CHAPTEE IX. 
TRUSTS AND THE FARMER. 

If trusts adversely affect any one of the great industries, 
they will in the long run affect all of them. If they are 
a burden and an evil to one class, they will become a burden 
and an evil to every other. If they are injurious to the 
wage-earner, sooner or later they will result harmfully to 
the farmer. If they oppress the man in the city, they 
will in time be oppressive to the man in the country. It 
is impossible, however, to consider economic problems, — 
questions as to the production and distribution of wealth 
and as to money making, — without each man considering 
their influence upon his particular industry and business. 
It is most natural that the great agricultural class should 
in this manner discuss the trust question. In fact, there 
is a certain peculiar propriety in their doing so, because 
farming differs from manufacturing and from wage-earn- 
ing in a special manner. In the former industry, con- 
centration of capital and combination of competitors are 
practically impossible. There will always be a lack of any 
complete union. Each farmer is a separate unit in his 
dealings with those with whom his products are exchanged, 
no matter how much the latter may be consolidated. The 
laborer in mills and factories can with comparative ease 
combine with his fellow laborers; because, the factories and 
mills being situated in centers of population, the laboring 
men can meet without inconvenience. In fact, they are 

173 



1 74 The Trusts 

closely associated in their daily work. But the farmers are 
not only millions in number, but are scattered all over the 
country. Union is practically impossible. The great num- 
ber of those who follow the pursuits of agriculture consti- 
tutes so large a proportion of American population that the 
effect of the trusts upon the farmer becomes a matter of 
vital importance to all the people as well as to the farmer 
himself. 

In one other respect the farmer has a peculiar right to 
consider the effect of trusts upon his business. He is the 
producer of the raw material, and there is a greater differ- 
ence between his interests and the interests of the sugar 
refiner, for example, than there is between the interests of 
the sugar refiner and those of the oil refiner, or between 
the interests of the sugar refiner and those of the starch re- 
finer, or between the interests of the sugar refiner and 
those of the laborer in the sugar refinery. 

It cannot be questioned that the farmer looks with 
great apprehension at the growth of trusts. As these 
great organizations more and more get the control of 
the industries in which he is especially engaged, he 
finds himself having but one buyer for many of his raw 
materials. There is no longer competition among buyers. 
It is a case of one buyer, one bid and one price, and that 
price, the farmer thinks is fixed, not according to the 
value of the product, but according to h|s own needs and 
necessities. If his necessities are such that he must make 
the sale (and usually he cannot afford to long hold back his 
product), then he must take the amount offered him. The 
farmer sees no hope; and it would be very foolish to deny 
that he has cause for alarm. 

Let us, however, carefully investigate the condition 
of the farmer under trusts. The majority of the products 
of American farms are food products. Wheat is the staple. 



Trusts and the Farmer 1 75 

Beef, pork, mutton and lamb are other important prod- 
ucts. Corn, rye, rice, potatoes, beans and barley are also 
among the chief articles raised. Besides these, there is 
an increasing cultivation of fruits and vegetables and 
garden products. All these products require comparatively 
little manufacture in order that they may be put upon the 
market in the form required for final consumption. Wheat 
and the other cereals, indeed, have to be ground into flour 
or meal, and this may properly be considered a manufac- 
turing operation. The slaughtering of cattle may also be 
considered manufacturing, although it is an extension of 
the meaning of the word to include this industry under 
that term. This one thing, however, is to be noticed with 
reference to the food products already mentioned, and that 
is that not only do a great many of them reach the con- 
sumer in a condition little changed from their raw state, 
but that the chief exceptions, namely, wheat and the 
cereals, are changed into flour at so many mills scattered 
over so wide an expanse of the country and requiring com- 
paratively so small an amount of capital that, notwithstand- 
ing combinations of millers may be formed, the possibility 
of monopolizing the milling industry is comparatively re- 
mote. Further a very large portion of the wheat that is 
raised in the country finds a. foreign market not as flour, 
but as wheat. Trusts, then, that is, great industrial com- 
binations, are not likely to monopolize the purchase of 
wheat. The price of wheat, for aught that trusts which 
are directly engaged in the marketing of wheat or the mak- 
ing of flour, can do, will depend upon the demand; and if 
great milling combinations can affect economies in grind- 
ing the wheat into flour so as to be able to reduce the 
price, they will undoubtedly be able to stimulate and in- 
crease domestic consumption of flour. This domestic con- 
sumption of all food products, whether they are consumed 



1 76 The Trusts 

in the raw or in the manufactured state, is sure to be in- 
creased if the millions whose incomes are derived from 
profits or wages in manufacturing industries are increased 
in number, or if they have their profits or wages increased. 
Hence, whatever will tend to build up the prosperity of the 
manufacturer and the wage-earner will benefit the farmer. 
If trusts, by means of their economies, can cause the manu- 
facturing business of the country to be prosperous: if they 
can give constant employment at remunerative wages to 
an increased number of men; if they can, by developing 
foreign markets, bring into this country vast wealth from 
foreign countries, then will there be an increased home 
demand and higher prices for American food products. 

It may be said that combinations have, as a matter of 
fact, depressed the price of farm products. The " Big 
Four" beef combine may be cited, and attention may be 
called to the fact, so often proclaimed, that along many 
lines of railway there is but one set of buyers for many 
of our staples, and that prices are depressed. Whatever 
truth there may be in the charges that these combinations 
actually dominate the market for cattle and for grain 
and that they arbitrarily lower prices, it will, we believe, 
upon examination be found that it is not so much their 
possession of vast capital that gives them thereby exclusive 
control over the trade and prevents competition, as it is 
a connection, secret and illicit, with those natural mon- 
opolies, the railways; or the possession of special privileges, 
unlawfully and improperly obtained, at the terminals of 
the different transportation lines. These, indeed, are 
monopolistic powers that are in no sense essential to trusts. 
If low prices exist to-day for wheat or for beef or for any 
other of our staple products, they are caused not by trusts, 
but by unlawful conspiracies between the railway inter- 
ests and the big dealers in these products, — evils that are 






Trusts and the Farmer 177 

in no way essential to the trust form of organization, — 
but evils which are as unlawful and criminal as robbery or 
arson or any other felony, and which should be punished 
in the same way. The railway should never be confounded 
with the trust. Both are gigantic consolidations of capital; 
but one in its very nature is a monopoly having many 
sovereign powers, such as the right of eminent domain, con- 
ferred upon it, and having a right of way or the owner- 
ship of a strip of land and of terminal facilities, which from 
the very nature of the ownership of property is exclusive, 
and which in the case of the railway is monopolistic. The 
trust, strictly speaking, is a great industrial consolidation, 
engaged in manufacturing, mining, milling, or selling. It 
has no element of legal or natural monopoly in it, except as 
it acquires possession of a public utility or of products, such 
as minerals, that are limited in amount, or as it obtains a 
legal monopoly, such as a patent right. The mining of an- 
thracite coal, copper, gold, silver, or possibly the right 
to furnish gas, water, steam-heat or electricity in a city, 
owing to the limited space in the streets through which 
the pipes and conduits must be laid, is monopolistic in its 
nature; but the control of that which may be and is con- 
stantly being produced and which can be produced with- 
out limit, as can nearly every manufactured article, can 
never become a permanent monopoly. If we listen care- 
fully to the statements of those who know why the price 
of wheat is kept down, if we analyze the reasons given by 
them, we are forced to the conclusion — admitting all their 
statements to be true — that the combinations which, to- 
day, are said to have killed competition among buyers of 
our staple products, are not industrial trusts, but con- 
spiracies between favored dealers and railway managers 
who have grossly violated their duties as common carriers 
and who have favored certain dealers and discriminated 



178 The Trusts 

against others. Perhaps no more detailed statement of 
the condition of the grain grower and the absence of any- 
thing like competitive buying of grain, has been given to 
the public than that made about a year ago by Mr. S. H. 
Greeley of Illinois, a prominent member of the National 
Grain Growers' Association. We quote from him: 

"An evil from which no relief is possible seems to be an 
absurdity in this age of progress and discovery, but the producers 
and shippers of grain in the great Mississippi Valley are to-day in 
the grasp of a number of so skillfully managed combinations, 
created by secret rates and special privileges granted them by rail- 
roads, that the brightest mind cannot suggest a practical remedy." 

"... Merchants no longer buy and sell grain in Chicago, but 
their places have been usurped by the recipients of cut rates and 
special privileges, who have become as necessary an adjunct of 
the modern railroad, tapping the grain belt, as the general freight 
office. It is their business to see that the railroad favoring them 
gets its share of the grain tonnage, and where a merchant paying 
the tariff rates of freight would lose nioney> this specially favored 
class grows rich; they handle all the grain that they are physically 
capable of caring for on the particular line of railroad of which 
they are the favored dealers. 

"The effect of this condition has been disastrous in many ways: 

" 1. Competition has been destroyed to a great extent, and the 
business of handling grain in Chicago markets has (by force of 
special favors from railroads) concentrated in the hands of several 
large concerns, who do not bid against each other, but are known 
to agree on prices each day for grain in territory where their bids 
are liable to reach the same sellers. 

" Without advantages of ability or capital pver the merchants 
whom they have driven from the field, these concerns, through 
employees and agents, carry on a traffic, not in grain, but in 
freight, switching and elevator charges; incidentally the grain is 
transported, but if tariff rales and fixed charges were paid it 
would show a [OSS. 

"2. Values Buffer far more than would be conceded even by a 
majority of the grain growers. Unnatural conditions constantly 
surround the movement of grain; if the business of a railroad 
lags, grain is forced to move by that railroad through its favored 



Trusts and the Farmer 1 79 

shipper, by a cut rate, thus creating a fictitious supply at a time 
when the demand is meager, and the result is a decline in values 
by reason of excessive offerings, while had the grain been per- 
mitted to remain at the country points until the demand justified 
its shipment, the depression in values would have been avoided 
and the demand would have been all the more urgent by reason of 
the grain not being in sight. 

" Another condition which tends to depress values is the piling 
up of vast stocks of grain in the warehouses of Chicago and by 
every trick and device preventing the moving of these stocks so 
long as they can be sold for future delivery at a profit. The 
public and private elevators of Chicago have passed into the hands 
of the concerns specially favored by the railroads; several of 
them lease the terminal elevators of the railroads. The result has 
been that the public warehouse system of Chicago has been pros- 
tituted to the extent that the public no longer can handle grain 
through them, and what were once the depots for the public's 
grain are absolutely the storehouses of the railroad's favored dealer 
to the exclusion of all other persons. It is to the advantage of 
this favored class that low prices should prevail, so that they can 
fill their vast warehouses (aggregating almost 40,000,000 bushels' 
capacity) with cheap grain, sell it for future delivery at a 
premium, buying back and selling for a still more deferred de- 
livery as often as market conditions will permit. When it ceases 
to pay tribute as a speculative commodity, they then proceed to 
sell it in eastern and foreign markets, and having driven out of 
business all other grain shippers by their methods, they merchan- 
dise the grain themselves; but no matter how urgent the con- 
sumptive demand, so long as speculative sales pay best, consumers 
cannot get supplies from the vast stores held in Chicago." 

" Practically all the great railroads tapping the grain belt are 
in the grain business; the details of their arrangements are, of 
course, secrets, but it requires very little investigation to satisfy 
the most skeptical that they each have one, two or three con- 
cerns handling the bulk of grain on their lines, to whom the pub- 
lished tariffs are simply a guide as to what the public have to 
pay; the public soon discover that the favored shipper can do 
business with an entire disregard of fixed charges and still pros- 
per. One railroad president admitted at a public investigation 
that his company had organized a corporation for the purpose of 
carrying on a grain business at all points on their line, that it 



180 The Trusts 

was necessary to do so to protect their interests, as their com- 
petitors had arrangements with shippers that were practically pre- 
venting the competition of the ordinary shipper." 

It would be most unfortunate if, in the study of a new 
form of industrial organization, we were unable to distin- 
guish between those things which are inherent elements 
of trusts and those things which are but abuses of their 
powers. It would be still more unfortunate if we should 
confound trusts which are merely industrial organizations 
engaged in manufacturing or trading or mining, and hav- 
ing, under fair trade conditions, no monopolistic powers 
whatever, with railways, which are in their nature essen- 
tially monopolistic. It would be equally unfortunate if 
we should fail to distinguish trusts which are vast indus- 
trial organizations with power, by reason of concentration 
of capital, to effect great economies in production and dis- 
tribution, from mere combinations of separate producers 
and distributers who agree to raise prices or to decrease put- 
put, but whose business methods are a continuation of 
old time methods of separate individual production and 
distribution, and whose sole purpose is to obtain higher 
prices without effecting any savings. Railroad discrimina- 
tion in favor of a trust is by no means proof that trusts can 
not exist without railroad discrimination, or even that it is 
practiced in favor only of trusts. It does not even bring 
up the question as to the advantages or disadvantages, or 
benefits or evils of trusts. It merely suggests certain evils 
in the management of what, in its nature, is a monopoly, 
namely, a railroad, over which, therefore, the people have 
and should exercise final and supreme control. If the 
u Big Four " of the beef combine or the Standard Oil Com- 
pany or great warehousing interests, or the anthracite coal 
companies or the whisky trust, or any other trust or any 
person whatsoever, receive from railroads, rates that dis- 



Trusts and the Farmer 181 

criminate in their favor and against their competitors — 
as unquestionably some of the trusts and many other busi- 
ness concerns (including many private ones) have re- 
ceived — then the step that should be taken is, such statu- 
tory prohibitions and regulations, such penalties, the re- 
quirement of such publicity of rates, such management 
and control of railways, if needed, that discrimination will 
be impossible. But it would be as foolish to prohibit 
trusts for these reasons as it would be to enact a law against 
the employment of clerks or salesmen in stores, because 
many clerks and salesmen have stolen moneys of their em- 
ployers. The farmer's most efficacious remedy, then, is 
not the destruction of that which will foster manufactur- 
ing and mining and milling, but, in the language of J. C. 
Hanley, of the National Farmers' Alliance and the Indus- 
trial Union of America, 

"the protection of the American grain markets from railroad 
and warehouse monopoly and the encouragement of local and ter- 
minal competition." 

Abolish these railway discriminations and these terminal 
monopolies, and the price of wheat and of cattle and of 
nearly every other staple product of American agriculture 
will be governed by the law of supply and demand. At 
the Chicago Trust Conference, J. G. Schonfarber, of the 
Executive Committee of the Order of Knights of Labor, 
delivered an address distinguishing the combinations which 
profit by franchises and special privileges, and which 
thereby have monopolistic powers, from the great indus- 
trial trusts which profit solely by combination of capital. 
With reference to the evils of railroad discrimination, he 
said: 

" With absolute equality over the railways of the country, so 
that every butcher could ship a car of cattle just as cheap as the 
beef trust, the beef trust could not hold the monopoly of the beef 



1 82 The Trusts 

trade; with a like condition every owner of coal lands could reach 
the coal market on the same terms as the monopolistic combina- 
tion of coal owners, and this is true in regard to nearly every in- 
dustry monopolized by trusts. Their control of the means of 
access to the markets or their connection with those who do con- 
trol these means of access is the principal source of their power." 

Whether or not he is right in his statement that the 
beef combine or the coal combine would lose its power if 
there was no discrimination in its favor, we cannot say; 
but there can hardly be a doubt that, with equal rights of 
transportation to all, there would be no undue depression 
of the prices of raw materials. 

If the farmer does secure the abolition of railroad 
discrimination, so that there can be at least fair competi- 
tion, and so that only the economically superior competitor 
can succeed, are there any other ways in which the farmer 
can be benefited? Does he not, indeed, need some other 
means to obtain prices which will be remunerative to him? 

It is stated that the records of the Agricultural Depart- 
ment show that the average cost per pound of raising 
cotton is six and two-tenths cents, while the average market 
price for a number of years has been between four and one- 
half and five cents. The American crop amounts to 3,500,- 
000,000 pounds per year. The loss of national wealth can 
be easily computed. Further, it is a notorious fact that 
for many years the cost of wheat production has, as a rule, 
been in excess of the market price. The remedies for 
these evils are: first, protection of the American market 
from warehouse and terminal monopoly, and the abolition 
of all discriminations tending to favor a few buyers at the 
expense of the many and enabling a few to monopolize the 
trade; secondly, an increase of the domestic demand, that 
is, the demand erf the manufacturers and the merchants 
and wage-earners of the Bast and North, who are not them- 
selvefi growers of wheat and cotton. We have shown how 



Trusts and the Farmer 183 

these two remedies will work. But the third remedy is 
the enlargement and extension of the foreign market. 
To-day the wheat grower of America has practi- 
cally but one foreign market, namely, England, which 
is also our great foreign market for raw cotton. We 
can to-day produce twice the amount of wheat or meat or 
textile fabrics that we need. We now produce in round 
numbers 500,000,000 bushels of wheat per annum; of that 
we consume 400,000,000 bushels and export about 100,- 
000,000. The price is largely affected by the Liverpool 
market. But let the American farmer obtain another for- 
eign market in addition to the one he now has and the 
price of wheat will increase enormously. Any agency that 
will create competition and give us another market w 7 ill 
stimulate the prices which competitors will establish in 
order to secure the food products w T hich they must have. 
The possibilities for the American wheat grower in the 
development of the Oriental market for American w r heat 
are truly wondrous. It has been estimated that if the 
400,000,000 of people in the Orient were to consume but 
half a peck of wheat per capita, or an amount that is only 
about l-40th of the average consumed by Americans, we 
could market each year 50,000,000 bushels of wheat. What 
an effect this would have on increasing the price of wheat! 
J. C. Henley has computed that the establishment of this 
market would raise the price of wheat fifteen or twenty 
cents a bushel for our entire crop, whether sent to Europe 
or the Orient or consumed at home, making an annual in- 
crease of between seventy-five and one hundred million 
dollars ($75,000,000 and $100,000,000). 

Besides food products, the farmer raises many other 
crops. As a rule, these which are not food products must 
go through many processes of manufacture before they are 
ready for the final consumer. Cotton is the greatest of 



184 The Trusts 

American products of this kind. One thing is universally 
true of all these raw materials, and that is this, the extent 
of the demand for them depends upon the extent of the 
market for the manufactured article. Let there be a very 
slight demand for manufactured cotton products, and the 
price of raw cotton will be very low. Let there be an in- 
creasing demand for the manufactured article and there 
will be a rise in market price for cotton in the bale. What- 
ever, then, tends to enlarge our markets, tends to increase 
the sum paid to the producer of the raw materials. If 
trusts, by producing more cheaply than others, or by de- 
veloping valuable foreign markets, can increase their sales, 
they will increase the demand for the products of Ameri- 
can farms. Instead of depressing the price, they will stimu- 
late an increased production and increase the price. Even 
the Standard Oil Company, by bringing into this coun- 
try each year $60,000,000 of foreign gold in payment 
for oil that is sold abroad, aids the American farmer; for 
whatever tends to increase the wealth of the country, in- 
creases its purchasing power. We have alluded already to 
the remark made by Prof. Jenks, of Cornell University, 
that a leader of one of the great trusts had told him that 
in one year they had received $500,000 as profits from 
foreign trade, and that every particle of the raw material 
had been produced in America, and that the increased 
trade stimulated the production of the raw material and 
kept up the price and gave employment to more men than 
had been thrown out of employment by the combination. 
One of the best and most dispassionate books ever written 
on the trust is that written by Ernst Von Halle in 1896. 
Commenting at that time upon the charge that trusts de- 
pressed the price of raw materials, he said: 

"It cannot he denied that the prices of raw materials have in 
some instances been depressed. The United States Leather Com- 



Trusts and the Farmer 185 

pany, which controls all the sole-leather tanneries of the country, 
as far south as Texas, succeeded in reducing prices immediately 
after its appearance in the markets of Chicago and Kansas City. 
It maintains a purchasing agent in Chicago. In the face of the 
ring of packers it does not seem to have violently changed the 
dynamics of supply and demand, but only to have readjusted 
them. The American Tobacco Company is said to have depressed 
the purchasing price of cigarette tobacco in the leaf by several 
per cent immediately after it began business. But we also observe 
a tendency in the opposite direction. With the increase of the 
cotton oil production, the price of cottonseed, which the trust 
had at first somewhat depressed, rose much above the former level. 
The trusts urge in their defence that in consequence of their 
efforts to increase consumption, the producers are given the oppor- 
tunity to dispose of much more raw material, and that thus, in 
the end, they will enjoy an increase of total profits, even where 
prices are reduced." 

To-day America has unparalleled opportunities to ac- 
quire a market in the Orient. The diplomatic tact and 
firmness of the present Secretary of State of the United 
States have achieved for us the " open door " to the mar- 
kets of China. We are assured equal trading privileges 
with the " most favored nations." No class is more vitally 
interested in this great achievement than the cotton grow- 
ers. No section will be prospered more by it than the 
South, for China, with its 350,000,000 people, presents an 
illimitable market for American cotton. .Since this cotton 
is in the manufactured form, the development of the 
Chinese market means prosperity and success for the cot- 
ton mills of New England, as well as for the cotton grower 
of the South. In the chapter on Trusts and Expansion, 
fuller consideration will be given to the great possibilities 
for America in trade with the Orient. 

Moreover the farmer has interests in the effect of trusts 
other than those that pertain to him as a producer. Much 
as he may produce, the number or amount of things that 



1 86 The Trusts 

he consumes, is very great. He has a few products to dis- 
pose of; but as the years go by, the number and variety of 
the things that he obtains in exchange for them increase, 
for his wants enlarge with the progress of civilization. ITo, 
by no means, raises, even, all of his food. His coffee and tea 
and spices and generally his sugar and molasses and many 
other things that he eats and drinks, are purchased rather 
than produced by him. It is only in the most primitive 
and remote and backward of agricultural communities that 
the housewife now spins or weaves as a part of the home 
life; for homespun clothing, even if the domestic labor is 
not considered at all in ascertaining cost, is rarely as cheap 
as that which can be produced in mills and factories 
and obtained in the form of ready made clothing. 
Further the farmer finds his great expense not in 
that w T hich he eats and drinks, nor in that which he 
wears; but in the cost of tools and implements and utensils, 
of wagons and reapers and mowers and plows, of drills and 
drags and cultivators, and also in the numerous articles 
which are needed to furnish the house of the American 
farmer and make it a typical American home. The farmer 
is vitally interested, then, like all the other classes of the 
community, in everything that means a cheapening of the 
cost of production and a lowering of the price. The great 
industrial combinations, we have seen, are able to cheapen 
production; and we have shown that it is impossible for 
them permanently to charge more than a fair price, or to 
obtain more than a fair profit over the cheapened cost of 
production. While the farmer does not want to see the 
price of the products which he sells diminished one farth- 
ing, yet he has not the slightest objection to seeing all those 
things which he buys, reduced in price, fifty or even seven- 
ty-five per cent. This is just what the farmer has seen as 
as a result of industrial combination in the last half cen- 



Trusts and the Farmer 187 

tury. In the case of many products, he has seen it occur 
within shorter periods. We have already referred in pre- 
ceding chapters to the United States Senate Committee's 
report on prices from 1860 to 1891. This committee in- 
vestigated about two hundred common articles, — manufac- 
tured articles as well as raw materials. Fifty-eight products 
of agriculture, in which little centralization of capital 
and little combination of effort were possible, showed in- 
creases in prices, varying from thirty to one hundred per 
cent; while the prices of one hundred and forty groups of 
manufactured products, in the making of which labor- 
displacing machinery had largely been introduced, fell 
from sixty to forty per cent, and some as much as seventy 
per cent, notwithstanding there had been a large increase 
(sixty-eight per cent) in wages. 

It would be folly to deny that there is danger in trusts 
to the farmer. The popular fear is that the prices of the 
articles manufactured from his raw materials will be unduly 
raised. The demand is ever for low prices. The manu- 
facturer who first yields to that demand obtains the en- 
larged trade. The trust by selling at low prices can in- 
crease its output. There is, indeed, a constant effort on 
the part of the trust, if it seeks to enlarge its output, to 
cheapen the cost of articles which it produces and sells, by 
obtaining its raw materials as well as its labor at the lowest 
prices. By so doing it can obtain large profits without rais- 
ing prices. Extortionate profits can in this way longer be 
concealed from the public. But the ultimate discovery of 
these extortionate profits is sure to arouse competition, and. 
with competition will come higher prices for raw materials 
and lower prices for the manufactured goods. That is one 
side of the picture. On the other side, the trusts are bet- 
ter able to give fair prices to the producer of the raw ma- 
terials in just the proportion that the trusts control the 



1 88 The Trusts 

price, in just the proportion that the trusts control the 
market. They can afford to pay high wages for labor and 
good prices for raw materials, if they have that practical 
monopoly of the market which so many attribute to them; 
because they can recoup the increased cost by an increase 
in price. The real and important truth is this: the cheap- 
est producer and seller will get the trade. The nation or 
individual that produces with the least waste will win in 
the struggle for the world's industrial supremacy. The 
demand for cheap goods will require the use of nearly 
every means of lessening cost. The producer or the nation 
of producers that does not adopt every labor-saving ma- 
chine and also every labor-saving organization, so as to 
make labor productive and so as to save waste, can sell its 
goods in competition with others, only by depressing the 
price of its raw materials or the wages paid to its em- 
ployees. It will not be difficult to do this, because if the 
producers of raw materials do not sell them at the depressed 
price they will be unable to sell them at all. On the other 
hand, the producer who saves every waste in distribution 
and production will be able to sell so cheaply that he will 
build up a big trade and have greater need for raw materi- 
als and therefore will pay more to get them. The conclu- 
sion of the whole matter is this: those who unite in great 
industrial organizations to produce are, by their savings in 
production arid in distribution, generally^ able to obtain a 
fair profit even while maintaining low prices for their 
products, and while paying increased wages and the same 
or higher prices for raw materials: but all those who pro- 
duce by the extravagant methods that tend to excessive 
competition are sure ultimately to lose this trade and to 
fail to continue as competitive bidders for the raw ma- 
terial of the farmer. 

The farmer, indeed, has much at stake; but the true 



Trusts and the Farmer 189 

policy for him would seem to be to encourage the growth 
of home industries, thereby increasing the home market 
for his products; to support every policy, industrial or 
political, that will enlarge the foreign market, — either that 
which will cause a demand for his raw products in their raw 
condition or that which will foster an increased demand for 
American manufactured articles, — thereby bringing into 
the country increased wealth for expenditure in the pur- 
chase of American products, all of which have their ulti- 
mate source in the American farm; and finally the farmer 
will consider but one of the two sides of his interests if 
he regards himself solely as a producer and forgets that his 
own wants and needs are largely supplied by the American 
manufacturer, miner, and miller, and that everything 
which tends to cheapen and lower the prices of the products 
of these industries, enables the farmer to obtain more of 
the necessities and comforts of life in exchange for his own 
agricultural products. 



CHAPTEE X. 
TRUSTS AND SPECIAL PRIVILEGES. 

So far in our discussion of trusts and their causes, ad- 
vantages, and evils, we have considered almost wholly the 
trust which is the natural combination of producers who 
have found the struggle of competition so ruinous that, in 
order to avail themselves of the economies that come from 
consolidation and to avoid the enormous wastes of compe- 
tition, they have united their interests. We have, perhaps, 
considered, not the typical trust, but the exceptional and 
the possible — the ideal trust. Our reason for doing so has 
not been any desire to build up theories of legislation based 
upon hypotheses, but to present the question of the bene- 
fits and the injuries of trusts, even when they are formed 
for purely industrial purposes, and when their methods 
and practices are only those which are incidental to the 
conditions of modern business life. It must be admitted, 
we believe, by the unprejudiced, that even the trust 
that is bereft of special privileges and managed with 
absolute honesty and with perfect fidelity to the interests 
of all concerned in it, and conducted in conformity with 
the letter of every existing statute and solely for the pur- 
pose of making money like any other business industry, 
presents possibilities of industrial as well as social and po- 
litical injury to the country. The evils as well as the ad- 
vantages of these trusts — ideal trusts, if you please to call 
them so — we have already considered. We believe that, 

190 



Trusts and Special Privileges 191 

while they may for limited periods be harmful and even 
noxious, yet in the long run, when rightly formed and hon- 
estly managed, even although those in control are actuated 
only by self-interest and a desire for gain, they will become, 
on the whole, great means for the cheaper production and 
more generous distribution of all material comforts, and 
mighty agencies in advancing civilization and in elevating 
mankind to a higher position; that competition is sure to 
prevent any permanent monopolistic evils in them, and that 
upon any temporary monopolistic evils we may properly, 
— in fact, should adopt stringent restrictions, in case our 
future experience proves to us that legislative remedies will 
be more speedy or more effective than economic remedies. 

We are charged with being idealistic, visionary and theo- 
retical in considering trusts in the way that we have. We 
are told that trusts are not prompted, as a matter of fact, 
by considerations of more economic production or cheaper 
distribution; that they are not, in reality, the result of 
competition; that they are not formed, as a rule, in order 
to save their organizers from impending bankruptcy and 
ruin; that experience shows that they do not grow in size 
and acquire their enormous strength because of their 
powers as cheap producers and distributers; but that they 
are ordinarily organizations for the purpose of plundering 
the people; that they are institutions of human greed and 
avarice; that they are nourished and supported and built 
up by favoritism and fraud; that they are the creations of 
special privileges; and that, if it were not for these privi- 
leges, in a free fight and a fair field these great organiza- 
tions would be defeated in the struggle of competition by' 
the smaller enterprises which are under the direct per- 
sonal management of their owners. 

The special privileges which it is generally said are the 
cause of the growth of trusts are railroad discrimination, 



192 The Trusts 

certain tariff rates which happen to be excessive rather 
than protective, unfair taxation and the free granting of 
public franchises. We believe that very nearly all of the 
trusts owe not only their strength but their formation to 
privileges of the kinds mentioned, which are, indeed, rob- 
beries of the public at large for the purpose of rewarding 
the favored few. 

Eailroad discrimination in favor of one person and 
against another is an act that cannot be denounced in 
terms too strong. If there is in the whole category of mis- 
deeds any one affecting only property rights, which is more 
heinous and villainous, more mean and contemptible 
in its methods, more pernicious in its results, than railroad 
discrimination, we do not know it. Arson, when life is 
not endangered, does nothing but destroy some property; 
but arson is quick in execution, and against its damages 
every cautious man is insured. The burglar and the thief 
may rob us of our property, yet they can, at the most, take 
but little. But the railroad which discriminates in favor 
of one shipper, stealthily, although gradually, takes from 
all others the profits of their business and the value of 
their property. It not only aids in the stealing of prop- 
erty; but with a malice that is almost intolerable to con- 
sider, its victim is lured on to constantly endeavor 
to acquire more property, to build up his business, to over- 
come the unseen advantage in the industrial march which 
his competitor has, and thus to keep* on in a struggle 
throughout which the victim hopes and strives against in- 
exorable fate. Eailroad discrimination is a contemptible 
crime, because it is stealing from those who are the support 
and the maintenance of railways; because it is the plunder- 
ing of those who have given to railways their enormous 
powers and their very right to existence; because, further- 
more, it is an act absolutely in violation of the implied 



Trusts and Special Privileges 193 

agreement of the railways to serve all alike. A book to 
which frequent reference will be made during the discus- 
sion of the trust question, is that which was written by 
Henry D. Lloyd — " Wealth Against Commonwealth" To 
many, " Wealth Against Commonwealth" with all its har- 
rowing details of fraud and favoritism, of oppression and 
crime, may seem like an indictment or arraignment of in- 
dustrial combinations; but it is in no sense such a docu- 
ment. A careful reading of it will show that it does not 
even purport to be an indictment against combinations 
themselves, for in one of the very early chapters, the uni- 
versal and natural tendency to combination and concentra- 
tion is summed up in that expressive phrase of Mr. Lloyd: 
" Monopoly is business at the end of its journey/' But 
" Wealth Against Commonwealth " is a specific indictment, 
replete with charges and counts, apparently substan- 
tiated by evidence, showing railroad discrimination, unfair 
competition, and the practice of methods of corruption, by 
bribery, intimidation, and improper influence, in order 
either to obtain the possession of public utilities, or else to 
induce public officials to 'refrain from enforcing statutes 
enacted for the purpose of protecting the public from crim- 
inal acts. The great crime — the special sin — which "Wealth 
Against Commonwealth " exposes to the public gaze is rail- 
road discrimination. In an age when men produce but a 
few of the things which they consume, and when that 
which one produces is of little value to him, except ac- 
cording to his ability to exchange it profitably for some- 
thing else, things are worth not what they cost, but what 
they will bring upon sale or in exchange. Deny one access 
to the market and you render valueless his product. The 
highway and the railway and every other channel of trans- 
portation are the avenues along which flow all the wealth 
of commerce. Market value is the only value that con- 



194 The Trusts 

cerns the merchant and manufacturer. He who has the 
cheapest means of reaching the market has wealth assured 
him. He who is prevented from reaching the market on 
equal terms is being constantly robbed. It is said, " There 
is no royal road to learning." By that is meant there is 
no easy way to acquire knowledge. But the royal road to 
wealth is the railroad that discriminates in one's favor and 
against one's competitors. Eailroad discrimination, how- 
ever, is by no means an inherent evil of industrial trusts. 
It is rather an evil of the railway system. There seems not 
the slightest reason to doubt that numerous trusts have 
received more favorable rates than their competitors; that 
they were built up and sustained in this way. It by no 
means follows, however, that all trusts have received such 
favors, nor that railways have discriminated in favor of 
trusts only. Eailway discrimination has been, and is to- 
day unquestionably being practiced; but large individual 
shippers are quite as apt to be the beneficiaries of this 
crime as the larger trusts. Whoever is the beneficiary, is 
the beneficiary of a fraud and a crime. Eailway discrim- 
ination is certainly practiced occasionally, and probably 
frequently, in favor of trusts; but the sensible and proper 
course is to enact and enforce such laws, to create such 
supervisory public officials, and to enact such penalties, 
that railways will either be prevented from this criminal 
practice or that their own interests will be opposed to it. 
Abolish railway discrimination and you will unquestionably 
lop off many of the trusts; and every abolition of such a 
trust is good riddance to bad rubbish. It relieves us of 
a business organization that is not only a fraud, but a fail- 
ure as a cheap producing and distributing organization, for 
it relies on the favoritism of railway discrimination simply 
because it cannot succeed in honest competition. But to 
abolish trusts for this reason would be the height of folly. 



Trusts and Special Privileges 195 

If railway discrimination be indeed the cause of trusts, then 
it would seem that those who are so desirous of destroying 
trusts would proceed at once to remove the cause. Abolish 
the cause and the result will cease. Prevent railway dis- 
crimination, and if trusts can be kept up only by discrim- 
ination in their favor, then trusts will go down. The rail- 
ways of the country are corporations that in their nature 
are peculiarly subject to governmental regulation and con- 
trol, for they not only owe their corporate powers to the 
government, but an implied agreement in their acceptance 
of a charter is that they will act as common carriers serv- 
ing all equally and impartially. 

It is charged freely that trusts are built up and sustained 
by the special privileges allowed them under the customs 
tariff; that if these restrictions upon free trade were re- 
moved, many prices that are now exorbitant would at once 
be reduced. Is this true? There can be no question that 
a tariff means, for a time, higher prices. The American 
tariff is based upon the fact, real or supposed, that our for- 
eign competitors, by reason of more poorly paid labor, are 
able to produce and sell at a lower price. Its purpose is 
to protect our home industries from the cheaper products 
of countries where a lower standard of living exists among 
the workingmen. There has probably never been a time 
when, if the tariff had been removed, prices of many of 
our articles would not have fallen. But the Ameri- 
can people, after almost a century of discussion and legis- 
lation upon this question, and after experiments with high 
protective tariffs and with low tariffs imposed only for 
the purpose of raising revenue, have decided that their 
prosperity and welfare are fostered by the maintenance of 
the higher standard of living that characterizes America, 
and by the holding out of incentives to the establish- 
ment of factories and to the building up of industries; and 



196 The Trusts 

the great majority of them, while willing to concede that 
conditions are fast changing, and that cheaper capital and 
inventive talent are making us a nation of such abundant 
producers that our greatest need is a foreign market, and 
that our tariff schedules must from time to time be changed 
and our policy in the future somewhat altered, still believe 
from experience that the protective policy is one not to 
be lightly or rashly cast aside. We cannot forget the de- 
pression' and stagnation of business life and the paralysis 
that fell upon industry only a few years ago as thj result 
of the persistent effort to remove our tariff duties. But 
the American people are not in favor of the tariff that 
fosters monopoly. We will not abolish a tariff merely be- 
cause the industries that have sprung up under it, in an 
excess of competition, may have, at some time, re- 
duced the price of their product below the sum that is rep- 
resented Ly the cost of production in Europe plus our tariff. 
Such a reduction in the price is prima facie evidence that 
the tariff on that article ought to be reduced; but it is not 
conclusive, any more than the price at a " slaughter " sale 
is evidence of fair market value. If, because of excessive 
competition, the selling price is less than that which will 
afford a reasonable profit to the manufacturer after paying 
American wages to his employees, and if afterwards a com- 
bination of these manufacturers restores the price only to 
the fair profit mark, we do not intend to abolish the tariff, 
which alone enables them to obtain this profit and to pay 
these wages. But, on the other hand, if the tariff is being 
used to permit manufacturers to charge a price one cent 
in excess of a fair profit after paying American wages, 
it is being used not to build up American industry, 
l)u t to foster a monopoly. Its effect is not to aid the 
American workingmen, but to plunder the American peo- 
ple. Such a tariff is a monstrous robbery, and none will be 



Trusts and Special Privileges 197 

quicker to lower it or to abolish it, if need be, than those 
who for years have voted for tariffs that will be a protection 
to our manufacturers and a safeguard for American work- 
men and a cause of prosperity to the whole American peo- 
ple. The subject of the tariff and the trusts is so im- 
portant that it will be considered in a later chapter, but 
this much may properly be said here, while we are con- 
sidering the effects of special privileges upon trusts: if 
the tariff is building up monopolistic trusts which are 
charging the American people prices that yield undue 
profits — and it is possible that a number of trusts are thus 
built up and sustained — then one way to tear down the 
trusts is to reduce or abolish this tariff. To prohibit trusts 
themselves for this reason would be to imitate the Dutch- 
man who, to rid his barn of the rats, burned it. But if 
jou abolish the tariff only in those cases where trusts are 
using it to exact exorbitant prices, beyond the fair profit 
mark even after paying American wages, not only will 
you probably kill many trusts, but if any are left, you will 
know that, in so far as the tariff is concerned, they are 
winning on their merits, because economically superior. 

Again it is said that trusts derive their strength and 
power from their possession of public utilities, — for instance 
that the Standard Oil Company owes much of its strength 
to its acquiring the pipe lines, which are in reality a means 
of transportation akin to the railway; and that myriads 
of corporations, such as telephone, telegraph, electric light, 
and gas companies, and scores of others, owe all their 
strength to the possession of franchises in the public streets 
of cities and villages and in rural highways, and to rights 
of way acquired by an exercise of the right of eminent 
domain, and to other public utilities. As to this there is 
not a particle of doubt. Thousands of companies are mon- 
opolies because possessing these utilities. But the ques- 



198 The Trusts 

tion of public franchises and public utilities should never 
be confounded with industrial trusts. The existence of 
trusts, as a class of industrial organizations, should no more 
be made to depend upon things done by them by virtue of 
their possession and control of public franchises, than 
should the existence of an individual be made to depend 
upon things done by him by virtue of a patent right held 
by him in an invention. Public utilities belong to the pub- 
lic. Public franchises are public property. If under our 
existing political and social and industrial system, our mu- 
nicipalities and state or national governments cannot suc- 
cessfully manage these properties, it by no means follows 
that they should treat them as worthless property. Public 
franchises should never be given away. At the most, they 
should be temporarily granted to the person or corporation 
who will pay to the people the most for their use, and who 
will guarantee to the people the most efficient service. In 
every grant or lease of them there should always be a reser- 
vation of the control of the public. Public franchises are 
generally in their very nature monopolies. He who ac- 
quires them knows that competition, even if possible, is 
impracticable. Their possession does, indeed, give one the 
power to exact a price for the service to be rendered, which 
is based not upon the cost of the service, but upon the fact 
that it can be rendered by only one, or, at the most, by a 
very limited number. If the industrial trusts owe their 
power and strength to the possession of public utilities and 
public franchises — as doubtless some do — the evil lies not 
so much in the trusts themselves as in the people who 
have squandered their valuable assets, — the people who, 
because of some fancied ultimate, indirect benefit to the 
people, have, like Esau, sold their birthright for a mess cf 
pottage. The remedy is for the people to come again into 
their own; to hold all that they still retain in the way of 



Trusts and Special Privileges 199 

valuable franchises; and, as time goes on, to re-acquire such 
of them as can honorably be re-taken; to impose fair and 
equitable taxation upon these valuable property rights, 
just as other property is taxed and just as Governor Roose- 
velt and the State Tax Commissioners of New York are 
striving to do in that state, through their strenuous 
and gallant efforts to enforce the provisions of the Fran- 
chise Tax Law which was introduced by Senator John 
Ford. Furthermore, every effort should be made to exact 
and require of every corporation rendering public service, a 
fulfillment of every agreement and obligation, express, 
implied, or assumed. Re-gain these public utilities and tax 
these public franchises, and require the fulfillment of cor- 
poration obligations, and you will scotch the snaky trust, as 
well as destroy thousands of local monopolies. 

Akin to the possession of public franchises, is the posses- 
sion of products which exist only in limited quantities, 
such as most of our metals and minerals. This is the pos- 
session of a natural monopoly. Some of our most exacting 
monopolies are based upon the control of practically 
the entire quantity of these products. The anthracite coal 
pool is an instance. All of the anthracite coal of the 
United States is found in a comparatively small area, and 
to-day it is nearly all in the practical possession of the 
seven great railway companies which traverse the coal 
fields. The output of coal, its price, and nearly every 
detail connected with the mining, the transportation, or 
the selling of it, is determined each month at a meeting 
of the chief sales agents. About the only limit, to-day, 
upon the existence of what would otherwise be a pitiless 
and merciless monopoly in coal, is the enormous amount of 
bituminous or soft coal which is scattered all over the 
country. But companies are in existence, and others are 
being formed, which are obtaining possession of vast areas 



200 The Trusts 

of our bituminous coal fields, or the means of transporta- 
tion from them; also of our richest copper mines; also of 
the richest deposits of iron ore. If our industrial trusts 
are able to obtain possession of coal and the metals and 
minerals which are found in limited quantities, the mon- 
opolistic powers which they have are due partly to their 
great wealth, but chiefly to their possession of these natural 
monopolies. If by limitation of capital — and in that way 
only — we can save ourselves from monopoly, then let us by 
all means limit the capital, for monopoly is a curse in every 
way. But the danger suggests even deeper thoughts, and 
causes one to wonder if, perhaps, the proper step to rem- 
edy the evil might not be to limit the extent of the power of 
acquiring these natural monopolies. Many of the consti- 
tutions of our states, even those of some of our most con- 
servative eastern states, for a long time contained clauses 
which reserved to the state the ownership of all gold 
mines. We do not know whether Pennsylvania has such a 
clause in her constitution, although New York for a long 
time did, but if Pennsylvania has, it would be far more 
sensible for her to have a clause reserving to herself the 
ownership and control of her coal mines, because they not 
only lie at the foundation of all her great industries, but 
furnish to the country, one of life's necessities, — the means 
of heating our homes and places of business. But, of 
course, this would be socialistic. It should, however, be 
borne in mind that in the case of the anthracite coal, tha 
monopoly has been acquired by companies in league with 
the railway companies traversing the coal fields. If com- 
mon carriers, chartered and incorporated for the purpose 
of carrying, and for that purpose only, could be restricted 
to the exercise of these functions and to the performance of 
these duties; if, furthermore, discrimination by them in 
favor of certain miners could be prevented, the practical 



Trusts and Special Privileges 201 

difficulty would largely be solved. We would find that our 
coal, our metals, and our minerals are so widely scattered 
that attempts to monopolize them would be far more diffi- 
cult; perhaps, impracticable. 

Not a few of our trusts owe their strength and power 
and existence to the possession of valuable patent rights. 
Patents are legal monopolies, — made so by law and pro- 
tected by all the force and power of law. The great ma- 
jority of the people of this country firmly believe in the 
wisdom of encouraging inventive talent, by holding out the 
reward of the exclusive right for a limited period to make, 
use, sell, and vend a newly invented article. Most of us 
believe that the great industrial progress of this nation is 
due to the labor-saving inventions which a generous system 
of patent law has called forth. But if our trusts are being 
built up upon patents — if by hook and crook they are being 
perpetuated long beyond the period of seventeen years, 
which a patent is supposed to run — as a number of our 
most oppressive trusts are, then the sensible remedy is a 
change in our patent laws rather than any attempt to stop 
that which, if changes in the patent laws were made, would, 
perhaps, stop themselves. Modify the patent laws and you 
will wipe out many of the most exacting trusts in the 
world and shear others of their power, without lessening 
the incentive to the poor but ingenious inventor. 

There is another phase of the question of trusts and 
special privileges which should not be overlooked. It is 
the political rather than the industrial phase. The great 
special privileges which may be obtained by corporations 
or by persons of great wealth are temptations to them to 
use every means to obtain them. The prize is great and 
cupidity is sorely tempted. It is not strange that in order 
to obtain these privileges, to secure high tariffs, to induce 
railroad officials to offer secret rebates or cut rates or special 



202 The Trusts 

favors, to persuade aldermen and the members of common 
councils to grant franchises in public streets or to enter 
into valuable contracts for services to the public, and to 
influence legislators to vest persons with peculiar powers 
and privileges, — men should yield to the temptation to pay 
out large sums of money directly or indirectly as bribes. 
The best remedy is for public sentiment to set itself against 
granting to any person or set of persons special privileges 
of any kind. Charters of incorporation should be granted 
under general and not special statutes. Public franchises 
should be leased or temporarily granted only after competi- 
tive bidding. Tariffs should be determined and fixed in 
accordance with government statistics as to cost of produc- 
tion, cost of living, wages, etc., both at home and abroad. 
Furthermore, bribery should be punished with the severest 
penalties, and, above all, the moral tone of the people should 
be Novated and purified, so that bribery and corruption 
might never find even an apologist. But bribe givers are 
by no means limited to trust agents or their officers. Tn 
* Wealth Against Commonwealth " there are many chapters 
which seek to prove bribery by the Standard Oil Company. 
Two instances come to mind, — one an alleged attempt to 
bribe oil inspectors to approve oil which fell below the 
standard fixed as the flash point; the other an attempt to 
bribe certain city officials to oppose municipal ownership 
of a natural gas plant. But in my lifetime I have more 
than onco heard of small local milk dealers — not groat, 
greedy consolidated corporations — who owned hardly more 
than one horse each and I milk wagon and a few cans and 
a few cows, who attempted to bribe local milk inspectors 

to approve milk that was below the standard of purity; 
and it will he admitted that there are instances innumer- 
able in which private individuals have offered petty bribes 

to aldermen, members of bommos councils, and legislators. 



Trusts and Special Privileges 203 

To abolish all trusts, because of any attempt which officers 
of the Standard Oil Company might have made to bribe 
oil inspectors, would be as foolish as it would be to decree 
that henceforth milk should not be peddled through a city 
street by milk peddlers, but should be sold only at farms, 
because some milk peddler has bribed the milk inspector. 
Who, in fact, is the worst sinner — the bribe giver or the 
bribe taker? If the legislator sometimes has been tempted 
to accept a bribe, is it not well known that not infrequently 
the legislator holds up good measures in order to secure a 
bribe as a consideration for withdrawing his opposition? If 
the Standard Oil Company, or any other company, has, in- 
deed, bribed a public official, and if for that reason trusts 
should be abolished, why should not public officials be 
abolished? Common sense suggests that bribery and the 
bribe giver and the bribe taker should be punished, but 
not that industry should be stifled. 

By all means, let us stop this granting of special privi- 
leges, this prodigal giving away of franchises, this surren- 
der of public utilities, this pampering, now and then, of 
over-fed industries with tariffs that are excessive rather than 
protective, this iniquitous railway discrimination, this cat- 
ering to the few out of the store-house of the public. Let 
us stop this business of favoritism. If we do, trusts by the 
score — perhaps by the hundred — will tumble down like a 
child's house of cards. Let us ajso prevent over-capitaliza- 
tion and corporate mismanagement — let us Lake away all 
the chance of the insiders robbing the outsider.?, of the 
majority betraying the interests and wrecking the property 
of the minority. Let us call "cut-throat" competition, 
what it is, " conspiracy; " and punish it accordingly; and 
M us also make public all those affairs of corporations 
which affect the public. If then there is any trust left, it 
probably will be an institution of economic superiority, — 



204 The Trusts 

able, at least, to produce and distribute more cheaply than 
any one else. Does the person who would abolish all trusts 
by one universal fiat, by one sweeping prohibition of all 
combinations of competitors, think that the steps just pro- 
posed are likely to be insufficient or ineffective, or that they 
are half-hearted, shrinking attacks on trusts? We ask 
him, then, in the first place, to answer candidly: " How 
many trusts can you think of that would be apt to remain 
if all the remedies suggested above w T ere adopted and ap- 
plied? Would not, in your opinion, a very large number 
of the trusts be abolished? Would not the majority of 
trust evils be suppressed? " Are such remedies inef- 
fective? Let us ask you again: "Do you think any 
remedy — absolute prohibition, government license, or 
anything else — will be effective if trusts are not 
shorn of these special privileges, if they are not compelled 
to submit to greater publicity, if corporate management is 
not required to be faithful, if the strong and powerful in 
the struggle of competition are not compelled to fight fair? 
Have your ]aws, national or state, which have absolutely 
forbidden trusts, which have declared trust owners crimi- 
nals, and have threatened them with heavy fines and long 
imprisonment, — have these been effective? How many loss 
trusts are there since 1890 — ten years ago — when you 
passe I the Federal statute, the Sherman act, forbidding 
them? Four years ago twenty-two states had placed trusts 
under the ban. Fine and imprisonment, 'and practical out- 
lawry, wore the penalties, yet nine-tenths of the trusts have 
been formed since then. Your laws have not been success- 
ful. Was ii because they wore not in harmony with eco- 
nomic laws, because they wore not in step with the progress 
of the world, booauso they t€ did protest too much," because 
you did not realize that you could not successfully wrestle 
with the giant trusis as long as you kept feeding them on 



Trusts and Special Privileges 205 

special privileges?" Do you think you can count the num- 
ber of slaughtered, if you really and truly and earnestly try 
these methods of extermination? Are the remedies half- 
hearted, or timorous attacks? Try them and see. Plenty 
of people have beaten drums and blown trumpets and put 
through laws, forever and utterly abolishing trusts, but they 
did not abolish. Trusts are very little more afraid of those 
laws than they would be if you should cry, "Booh! "at them. 
But if you intend to enlist in the fight against special privi- 
leges in all its forms, you do not want to be chicken-livered; 
and it is no ninety days' campaign, and no picnic war. 
Are fr proposed remedies a shrinking method of attack? 
Well, take away all the special privileges, all the chances 
for over-capitalization, all corporate mismanagement, all 
unfair competition, and, while there may be some evils left, 
yet the trust problem will shrink to such small proportions 
that we can dispose of the rest of it under the order of un- 
finished business. 

It is often said that the trusts are so tig that they have 
obtained control of the railways and other means of trans- 
portation, of the public franchises and utilities, and of the 
patents; and that the tariffs are made by them and for them; 
and that in competition with them the struggling com- 
petitor is stricken down by a giant's hand. Is not the 
true statement that the trusts are so big because they have 
obtained control of the railways and other means of trans- 
portation, the public franchises, public utilities, etc. ? Rail- 
way discrimination began before trusts. The Standard Oil 
Company, — the first of the trusts and, according to Henry ' 
D. Lloyd, the successor of the South Improvement Com- 
pany which made a deal with the railways whereby its oil 
was to be carried at about half the rate charged its rivals, 
the difference to be given to the South Improvement Com- 
pany, — came into being after this manifestly unfair agree- 



206 The Trusts 

ment, and not before. If it is, indeed, the successor of the 
South Improvement Company, one can have little doubt 
after reading the reports of courts, investigating com- 
mittees, and the Interstate Commerce Commission, that it 
came not only after this iniquitous agreement, but as a re- 
sult of it or of an agreement, express or understood, of sim- 
ilar purport. Of course these things are more or less re- 
ciprocal. All concerns seek the privilege, but the big con- 
cern is more apt to get it; the privilege results in work- 
ing up the big concern, — the trust. The appetite does, 
indeed, grow upon what it feeds. However, if there is any 
uncertainty as to which comes first, the trust or the privi- 
lege, this much is certain, destroy the privilege and you 
destroy the trust based upon it. 

The remedies proposed are natural. They tend not to- 
wards socialism, but away from it. They straighten things 
out and clear away obstacles and leave a clear track 
for some good, free, healthy individualism. They do hot 
whimper of paternalism, they do not savor of governmental 
interference. They are good remedies because they seek 
to reach first causes. They are potent remedies not only 
for the economic evils, but also for the political evils of 
trusts. The special privileges which it is possible to secure 
tempt the trusts to bribe, quite as often and quite as much 
as trusts by bribery tempi legislatures to create and bring 
into being some new form of privilege. * 

The remedies here proposed are also simple, economic 
and practical. They restore things where they were, where 
they were meant to be, and where (hey ought to be. Tiny 
leave the figW of competition to go on upon its merits. 
They atop take contests. They leave trusts free to form 
and {wv to act, if they form naturally and act properly, 
and in accordance with such laws as may be enacted for 
their regulation and control. They leave the United 



Trusts and Special Privileges 207 

States free to adopt the greatest and most perfect 
industrial organizations, to use in its contest for 
the world's industrial supremacy; and, on the other 
hand, free to regulate, control, restrict, or, if found 
necessary, to abolish; but they also leave each and 
every citizen of the United States, poor as well as rich, a 
fair field and a free fighting chance and the fullest oppor- 
tunity by his own individual efforts to win for himself suc- 
cess, prosperity and wealth. They can certainly accomplish 
an immense amount in correcting trust evils. If they are 
not sufficient, they do not prevent the use of supple- 
mentary remedies; and they are equally sure to add to their 
potency. 



CHAPTER XI. 

PROMOTION, OVER-CAPITALIZATION, AND PUBLICITY, 

OR 
WIND, WATER, AND LIGHT. 

Under normal economic conditions comparatively few 
individual enterprises would amalgamate except when such 
a step would result in greatly increased economy in con- 
ducting business. Owing to the natural preference of every 
one to be at the head of his own business concern, 
people generally are not desirous of sinking their individu- 
ality in great corporations. The business which has been 
built up by a man, is often prized by him because it is a 
thing of his own creation. The business that is handed 
down from father to son, and to the son's son, is an heir- 
loom with which men do not like to part. With the excep- 
tion of the few who for personal reasons desire to retire 
from active business, sales of " going " and successful busi- 
ness enterprises, especially of a manufacturing character, 
are comparatively few. Unless paid a sum in excess of 
its fair worth, it is usually when a person becomes con- 
vinced that, because of excessive competition, he is abso- 
lutely sure to fail in business, that he will consolidate 
with others, hoping in the union of the weak to find 
Btrength. If only ordinary business considerations pre- 
vailed, if there were not other insidious influences at work, 
we should find thai trusts and combinations and consolida- 
tions wore the symptoms of bad times, and the signs of 
financial distress, and we should expect to see them most 

208 



Over-Capitalization and Publicity 209 

frequently formed during periods of business depression. 
It is undoubtedly true that the early combinations were 
brought into existence by such conditions, and that, even 
to-day, many of the trusts are combinations of capital on 
the defensive which have adopted this method of organiza- 
tion as a means of salvation from impending ruin and 
bankruptcy. But the facility and ease with which shares of 
stock are bought and sold upon our stock exchanges, and the 
immense possibilities of acquiring riches rapidly, especially 
by those who, having control of corporate companies, are 
fully acquainted with their financial condition, resources 
and possibilities, and even more especially by those who, 
being in control of these great companies, are willing for 
the sake of gain unscrupulously to manipulate the affairs 
of the companies entrusted to their care, — these things 
have brought it about that as an actual fact, the great ma- 
jority of trusts that are to-day formed, are organized ap- 
parently for purposes of manipulation rather than manu- 
facturing. 

It is significant that most of our trusts now in existence 
were formed in the recent years of unparalleled prosperity, 
instead of in the years of adversity. They seem to be a 
result of good times and buoyancy and confidence, although 
possibly they are reciprocally a cause of such conditions. 
It can hardly be claimed that they are the result of the 
old years of depression beginning with 1893, notwithstand- 
ing the trying times of that panic clearly showed business 
men the awful cost of the wasteful methods of competition 
and the savings of co-operation and combination. It is 
doubtless true that few of the trusts, to-day, are formed 
without the organizers being partly influenced by the pos- 
sibilities of more economical production and distribution 
which the new form of organization offers, yet it is even 
more certain that a very large number of the trust organ- 



210 The Trusts 

izers are actuated by other motives, — by the opportunities 
of unloading their over-valued properties on innocent in- 
vestors, by possibilities of stock manipulation and, in many 
cases, by the apparent ability to obtain, at least tempora- 
rily, a monopoly, — all of these motives leading to methods 
and practices which are unscrupulous, if not criminal, and 
which result in swindling the investing public, in betray- 
ing and defrauding the minority stockholders, in impair- 
ing public confidence, in unsettling the financial condition 
of the country, and in attempts to obtain undue profits 
and to exact extortionate prices. The great evil of trusts 
to-day — the great source of their evil — is trust promo- 
tion, and the ways and means that it adopts and the prac- 
tices that it occasions. 

Trust promotion is a new industry that has sprung up in 
recent years. The combinations that are to-day made 
by business men are by no means always prompted by the 
business men themselves. They are suggested, inspired, 
nourished, and fostered, as a rule, by men who have no 
connection whatever with the business enterprises, — by 
the trust promoters. The profits of trust promoters have in 
many cases been almost fabulous. It was at one time ru- 
mored that the promoters of the American Steel and Wire 
Company received $15,000,000 in stock for their sendees 
in organizing that company. While this was very likely 
an exaggeration, it is a fact that in November, 1898, one 
Gerritt II. Ten Broeck of St. Louis, sued John W. Gates 
and Elbert H. Gary for $1,875,000 cash, the amount which 
lie claimed he would have received for promoting this 
company had he not been displaced by others; and yet 
Ten Broeck was to get but one-half the profits. It has 
also been widely reported that one of the most successful 
of the greatest trust promoters has within the past two 
v<, or thereabouts, received between $30,000,000 and 



Over-Capitalization and Publicity 2it 

$40,000,000 in stocks for his work in organizing trusts, 
and that deducting his expenses in securing options and 
charters and " divying " up with others, he has probably 
realized at the market value of the stocks received by him, 
about $10,000,000. It is said that the promoter of the 
American Tin Plate Company received common stock of 
the company, which was actually worth about $4,000,000, 
and the par value of which was $10,000,000; while the 
promoters of the American Steel and Hoop Company, the 
Eepublic Iron and Steel Company, and the National Tube 
Company, are also said to have received, in each case, 
$5,000,000. 

Trust promotion of this kind is made possible only by 
over-capitalization. Abolish over-capitalization, and the 
promoting business would fall flat. Put an end to the possi- 
bility of making great fortunes through the sale of watered 
stock, and not one-half as many trusts would be formed. 
It is usually by giving to the owners of the several plaiits 
their actual value, either in cash or in bonds secured by 
mortgage or, at least, in preferred stock, and then by 
giving them in addition large amounts of common stock 
as a bonus, — paying them twice over, as it were, for their 
plants, — that the trust promoter induces the various owners 
of the plants to part with their property. Paying them this 
extravagant price, the promoter and those associated with 
him can make profits only by selling the stock to the public 
at a high price. Concealment of the truth and misrepre- 
sentation thus become necessary to the success of their 
plan. Further to give the stock an apparent value they 
either have to make it earn dividends which are based on 
extortionate prices, or else to declare dividends which are 
never earned. The total nominal capitalization of the 
various incorporated trusts in the United States to-day is 
about $7,500,000,000, but the best estimates are that the 



212 The Trusts 

actual capital is much less than one-half that amount. 
This shows the amazing amount of over-capitalization in 
the aggregate. Probably there is not a single trust, the 
capitalization of which is not greatly in excess of the actual 
value of its tangible assets; and there are comparatively 
few whose capitalization is not in excess of their earnings 
at fair prices. 

A typical instance of the way in which modern trusts are 
formed with inflated capital, was the fish-packing company, 
commonly known as the Menhaden Trust. Perhaps no better 
statement as to the manner in which it was capitalized can 
be given than that which appeared not long ago in The 
New York Herald, in the following article: 

"MENHADEN TRUST PLANS. 



In the Jersey City Court of Chancery yesterday Vice-Chancellor 
Pitney granted an order which is the first step toward the re- 
organization of the American Fisheries Company, more familiarly 
known as the ' Menhaden Trust.' The company, which has a 
capital of $10,000,000, failed recently for $190,000, and Thomas 
Russell and Charles Hobbs were appointed receivers by the New 
Jersey Court of Chancery. 

Charles Corbin, as counsel for the receivers, applied to Vice- 
Chancellor Pitney yesterday for an order authorizing the re- 
ceivers to sell the property of the company and to borrow, on 
receivers' certificates, $25,000 to pay insurance premiums, on the 
plant, now due. A committee of stockholders itiants to buy in the 
plant at no more than $200,000. 

Nathaniel 15. Church, who was general manager of the old com- 
pany, testified that it would require $100,000 to man and equip 
the company's boats and get them ready for the season's fishing. 
The Vice-Chancellor asked why it was that the company's capital 
was so large when it required only a comparatively small amount 
to do business on. 

'Oli, that's the English way,' said Mr. Warren, counsel for the 
Knglish shareholders. 



Over-Capitalization and Publicity 213 

1 Well, you've managed to fail in the American way/ replied the 
Vice-Chancellor." 

It must, however, never be forgotten that so great are 
the economies of production on a large scale, so enormous 
is the waste of competition which is saved by combination, 
that properties owned and managed as one consolidated 
property, are inevitably of much greater value than when 
run independently. The Standard Oil Company is to-day 
capitalized for something in excess of $100,000,000, but its 
stock sells for about 600 in the open market. For several 
years it has paid dividends averaging thirty per cent, and 
the rate of dividends is to be considerably raised this year. 
Notwithstanding the fact that, in fixing the capitalization 
of the Standard Oil Company, the amount was placed at 
a sum considerably in excess of the appraised value of the 
tangible property — such intangible property as good-will, 
patents, and trade-marks being included in the valuation — 
yet in so far as earning capacity is concerned, the Standard 
Oil Company is under-capitalized instead of over-capital- 
ized. If we assume that its prices are somewhat in excess 
of what they should be and that they should be lowered, 
it is doubtful if even at the probable decreased receipts, 
the company could be said to be over-capitalized; and 
we must not lose sight of the fact that the price of kero- 
sene oil has been constantly lessened since the formation 
of the Standard Oil Company. The American Sugar Ee- 
fining Company, — the Sugar Trust, — is capitalized for 
nearly $75,000,000, and the best estimates are that the 
actual cost of the property is not over a third or a fourth 
of the amount of the capitalization. Still, until recently 
the company has paid for many years seven per cent on 
its preferred stock of $36,968,000 and an average of twelve 
per cent on its common stock of the same amount. This 
dividend paying ability is certainly, in part, at least, due 



214 The Trusts 

to the economies of production. It may also be partly 
due to the imposition of extortionate prices. A study of 
prices alone will tell which; but the excessive capitaliza- 
tion furnishes an opportunity for concealing the real ex- 
tent of profits. The American Tin Plate Company is 
capitalized for $50,000,000, $30,000,000 being common 
stock and $20,000,000 being preferred. The owners of 
the plants, the cost of replacing which has been estimated 
by experts as $12,000,000, received $18,000,000 worth of 
preferred stock and $18,000,000 of common; $2,000,000, 
of each kind of stock were sold to the public in order 
to obtain a working capital, while the balance of $10,000,- 
000 went to the promoter of the scheme. Mr. Byron W 
Holt, in his article on trusts in The Review of Reviews 
for June, 1899, computes the market value of the stock 
of the company at the quotations existing at that time, 
namely, forty for common, eighty-five for preferred. This 
would make $29,000,000 as the market value for the $50,- 
000,000 worth of stock in June, 1899; but he quotes ex- 
perts as estimating the net profits of the company for that 
year at $5,000,000, and the value of the annual output at 
$20,000,000. Another instance of over-capitalization men- 
tioned by him is that of the American Felt Company, 
capitalized for $5,000,000, with a bonded indebtedness of 
$500,000; he estimates that the cost of the tangible assets, 
will not cover more than the amount of # the bonds. The 
American Steel and Wire Company is capitalized at $90,- 
000,000, $40,000,000 of which is seven per cent cumulative 
preferred stock. According to Mr. Holt, who has made 
inquiry into the matter, the actual value of the property 
does not exceed $30,000,000, and is probably much less. 
Twice the actual cost of all the important plants consoli- 
dated into the companies was paid to their owners. Yet 
it was reported by one of the directors of the company that 






Over-Capitalization and Publicity 215 

the yearly net earnings of the company would be $12,000,- 
000. Thus it would appear that, in the cases cited, while 
there has been an excessive capitalization compared with 
the cost of the tangible assets, there was not excessive 
capitalization as compared with earnings and dividend 
paying capacity. The question at once suggests itself, 
however, whether this great earning capacity is the result 
of the savings of combination or is due to monopolistic 
control; also whether, if due to the savings of combination, 
it should not be shared to a greater extent with the public; 
also what, if any, effect the over-capitalization itself has 
had upon the prices that were charged. 

The possible evils of over-capitalization are many. The 
chief are, first: the opportunity and temptation to deceive 
the innocent and uninformed investor; second: to exact 
unduly high prices in order to pay dividends upon the ex- 
cessive capitalization, — this partly for the purpose of ac- 
quiring the dividends, but even more frequently in order to 
give to the watered stock an apparent value so as to make 
it easy to unload it upon the investing public; third: the 
incentive to rash speculation in stocks by officers of cor- 
porations, and, incidental to this, such management or mis- 
management of the affairs of the companies entrusted to 
them, as will arbitrarily and improperly influence the mar- 
ket value of the stocks and in many cases affect their actual 
value. Let us consider in detail these evils and their full 
effect and some possible remedies for them. 

So influential a journal as The New York Herald has 
declared editorially that over-capitalization is the root of. 
nine-tenths of all the stock manipulations and frauds that 
are practiced upon the public. Bourke Cochran, in his ad- 
dress at the Chicago Trust Conference, argued that over- 
capitalization tended in no way to affect prices. According 
to him, whatever be the capitalization, the owners of the 



216 The Trusts 

company will endeavor to obtain all the profit that they 
can possibly derive. But it would seem as if the great 
orator overlooked the fact that excessive capitalization will 
stimulate those to whom the stock is originally issued, to 
charge high prices for their products in order to declare 
dividends and to give an apparent value to their stock, so 
that they may sell it to the investing public; and that over- 
capitalization permits the imposition of excessive prices 
and the earning of unduly large profits without its becom- 
ing known to the public, because of the profits being dis- 
tributed in comparatively low dividends upon a capitaliza- 
tion which the public does not know to be excessive. This, 
however, is an evil which could be, in part at least, cor- 
rected by publicity. 

It has been said that over-capitalization, in itself, is of 
little consequence; that the amount of stock that is issued 
is not the value of the property of the corporation; that 
at the most it is merely the opinion of those who issue it, 
as to its value, present or prospective. But, in fact, it is 
often not even an honest, bona fide, well-founded, or rea- 
sonable opinion. A certificate for one share of stock whose 
par value is $100 is a statement that it represents property 
worth at some time, in some one's opinion, $100. But our 
great trusts are often capitalized at sums that cannot be 
their fair value, now or in their future, in the belief of any 
person of sound judgment. Against the opinion of Bourke 
Cochran, who speaks more or less from the theoretical 
standpoint, should be set up that of James B. Dill, Esq., 
the well-known corporation lawyer of New York, who re- 
cently had charge of the incorporation of the Carnegie 
Company, capitalized at $200,000,000. In his paper read 
at the twelfth annual meeting of the American Economic 
Association, held ai Ithaca, N. Y., December 27-29, 1899, 
entitled, "Some Tendencies of Trusts which May Become 



Over-Capitalization and Publicity 217 

Dangers"; there occur these pregnant paragraphs (italics 
are ours): 

"Excessive Capitalization The first tendency which may be 

regarded as dangerous is excessive capitalization. 

" The results of excessive capitalization are threefold : I. The 
Impairment of Public Confidence. — In order to protect the finan- 
cial reputation and standing of the country, everything relating 
to finances and financial institutions should be above suspicion 
either of mistake in judgment or conscious error. 

" The country with securities that wildly fluctuate, that are 
affected by every breath of suspicion or suggestion, is somewhat 
in the same shape as a ship at sea with a loose and rolling cargo 
throwing itself from side to side in the hold of the vessel. To the 
man who thinks, from a financial standpoint, the situation pre- 
sents a grave question. The root of the trouble is the alarm, 
panic and fear which is produced from a lack of knowledge and 
from want of positive information as to how high or how low 
these securities ought to go, based upon a public demonstration 
of the corporate fraction. It is the want of publicity, the resulting 
inability to form an opinion, and want of judgment as to sound 
values, that causes the panic and creates the ruin. 

"II. Improper Dividend Payments. — A corporation that is ex- 
cessively capitalized, in order to keep in the race, must provide 
for the payment of at least minimum dividends, and that too 
upon a stock which by no means represents the actual value of the 
property, and often the estimated earning power of the company 
is based upon the earning power in prosperous times and with no 
allowances for times of lesser prosperity. In such a situation, 
therefore, a board of honest and well-meaning directors are faced 
with a difficulty; they must either pay their dividends to ap- 
proximately the same amount as their neighbors more fortunately 
situated, or they must permit their stock to become depreciated 
in the market as a result of failure to pay dividends. The ten- 
dency of an attempt to pay dividends upon this excessive capitali- 
zation is to pay dividends in excess of the actual earning power, 
and out of capital account. 

" One way in which this is said to have been done is by the con- 
version of the capital into dividends, a process which in the end 
is sure to wreck the company, decreasing as it does its earning 
power each year in proportion to the amount thus withdrawn. The 



218 The Trusts 

tendency is to supply the gap thus made in the capital of the com- 
pany by forcing on the books the capital account with property 
taken from elsewhere. In such a case the tendency again is to 
conceal from the stockholders the real state of affairs. 

" III. Effect on Prices and Wages. — The third effect of excessive 
capitalization and the attempt to pay dividends upon such capital- 
ization is a tendency to create artificial earnings upon an artificial 
capital, both by artificially raising the price of the article produced, 
and by the depreciation of the wages paid. The result to the pub- 
lic, from an economic standpoint, is objectionable." 

Corporate management in the United States has been 
so frequently and so notoriously corrupt and dishonest and 
traitorous and villainous, and yet so infrequently punished 
and so rarely even rebuked or condemned, that there are 
not a few persons who, knowing the hazards of the owner- 
ship of corporate stocks feel but little sympathy with those 
who are deceived or defrauded in transactions relating to 
such property. To a great degree, ownership of corporato 
stocks, whether it be ownership of the scrip for investment 
purposes, or purchases upon margin, is considered by 
many as little better than " stock gambling." The practi- 
cally utter want of any voice in the direction of the busi- 
ness by the small stockholder, his generally complete lack 
of any definite knowledge of the manner in which his busi-. 
ness interests in great corporations are being managed, 
make the actual value of one's property in such companies, 
a mere matter of guess. The small investor who buys such 
property, to a great extent u buys a pig in a bag." When 
he sells one stock to buy another, he is doing little else 
than repeating the school boy's favorite method of specu- 
lative exchange, " trading jack-knives without sight and 
without seeing." Not only has the small stockholder no 
accurate knowledge, but time and time again the officers 
in charge of his property have misled him, either with 
absolutely false statements or with statements that natu- 



Over-Capitalization and Publicity 219 

rally cause him to draw conclusions and inferences that 
were incorrect. Hundreds of times, he has seen the man- 
agers of his property absolutely mismanage it and do every- 
thing in their power to ruin his business and depreciate its 
value. During the spring of 1900 the press of the country 
has been filled with charges that an officer of the American 
Steel and Wire Company has purposely misled the public 
concerning the condition of that great trust; that the 
business of the company has been managed in such a way 
as to depress the market price of the stocks of the com- 
pany, and that men have been needlessly thrown out of 
work and factories unnecessarily closed, for the purpose of 
giving the public the impression that the affairs of the 
company were not in a prosperous condition. Even if in 
this particular case these charges of misrepresentation and 
mismanagement are untrue, as perhaps is the fact, yet it is 
only an instance of the possibility of mismanagement by 
corporation officers and of the impairment of public con- 
fidence in the present methods of corporate control and 
management. The Third Avenue Eailroad, one of the 
great systems of surface street cars in the metropolis, has 
lately been forced into bankruptcy apparently through the 
mismanagement and dishonesty and criminal conduct of its 
officers. The annals of American finance are filled with 
similar instances. 

A remedy that would be most potent, for all the evils of 
corporation mismanagement, would be to refuse to limit 
the liability of officers and directors. It is necessary in 
the cases of great corporations to limit the general liability 
of stockholders to the par value of the stock owned by 
them. This is because of the absolute impossibility of all 
the stockholders taking an active part in the management". 
But .this reason does not apply to officers and directors. 
Corporate mismanagement will never be stopped, the rights 



220 The Trusts 

of minority stockholders will never be fully protected, un- 
til officers and directors are held practically to the same 
liability as individuals, and are released from it only when 
the company's records show that the special action creating 
the liability was opposed by them. A director who votes 
to declare a dividend which has not been earned, should be 
criminally punished for it, and the corporation should 
have the right to recover it from him at the suit of any 
stockholder. At any rate, the minimum of liability of di- 
rectors of corporations should not be less than that of 
directors of national banks or trustees of saving banks. 

Dishonest and corrupt management is not necessarily 
confined to corporations that are over-capitalized, but the 
creation of a large amount of inflated stock not only in- 
creases the tendency to improper management, to undue 
speculation, and to shameful manipulation, but multiplies 
the opportunities for such malpractices. 

Lack of publicity is, however, the real evil, for it fur- 
nishes to the persons having knowledge of the true con- 
dition of the affairs of a company, opportunities to profit 
by their own peculiar knowledge, and by the ignorance of 
others who have money to invest or who hold the stock 
of the company and wish to sell it. 

We have an old law maxim: " The safety of the public 
is the supreme law," but the safety of the public can be 
secured only when there is knowledge of the real dangers 
confronting it. In our system of corporation laws, the 
ignorance of the public is the supreme flaw. The New 
York, Herald of March 6th, in speaking of the reduction in 
the dividend of the Sugar Trust, says: 

"The Bugar Trust exhibits in an equally clear light the evils 
of secrecy in the management of these great combinations. A fall 
of $60 b share, in the last three months, preceded yesterday's re- 
duction of the dividends. As no statement of the earnings or flnan- 



Over-Capitalization and Publicity 221 

cial condition of the property is made to the share-holders, they 
could have no means of gauging the real value of their holdings. 
No knowledge that the dividend would be cut in half; no protection 
against manipulation of the market by insiders or against the 
rumor-mongers and speculators of Wall Street. A little group of 
insiders — or possibly one individual among them — alone knew 
what was to be done when the directors were yesterday hurriedly 
summoned, tico days in advance of the expected meeting time, and 
after a three minutes 9 session announced the fact of such vital im- 
portance to the thousands of share-holders in the property. On 
behalf of consumers, the trusts must be kept from tampering with 
tariffs and legislatures. On behalf of the investing public, they 
must be compelled to make full and sworn statements, and direct- 
ors must not be permitted to serve as mere decoys, but must be 
held to strict accountability, and punished when, as in the case of 
the Malting Company, described in The Sunday Herald, the share- 
holders are deceived by the payment of so-called dividends in ex- 
cess of earnings." 

Unfortunately there has been of late in all states, a grow- 
ing tendency to relieve corporations from the duty of pub- 
licity of their affairs. James B. Dill, Esq., who has al- 
ready b^en quoted, in his paper read at the meeting of 
the American Economic Association, commented on the 
marked tendency to avoid proper publicity, as manifested 
by recently enacted legislation in several important states. 
In certain great financial states practically no publicity is 
now required. But it has remained for Delaware, the next 
to the smallest of all the states, to enact a corporation law 
which is practically a license for freebooting and piratical 
financial buccaneers to clothe themselves in the garb of a 
corporation, and, taking advantage of the comity that has 
always allowed a corporation formed in one state to do 
business in every other, to prey upon the unsuspecting 
and the innocent. There has recently been circulated 
throughout the country a little four-paged card entitled 
"Why do they Incorporate in Delaware?" Sixteen rea- 



222 The Trusts 

sons are given; and the laxity of the law as epitomized 
in those reasons and the opportunity for fraud and unfair 
dealings that this statute renders possible, are a reflection 
upon the integrity and honor of the state of Delaware. 
We quote from that circular the sixteen reasons, italicizing 
certain ones of them which particularly render publicity 
impossible, or which open the door to fraud. Thus it is 
stated that a corporation organized under the Delaware 
law: 

" 1. May hold its annual meetings outside of this State. 

2. May keep all original looks outside of this State. 

3. May issue full-paid stock for cash, property or 
SERVICES. 

4. May save from £ to | of the expense required under 
the New Jersey Law. 

5. May carry on any lawful business except banking. 

6. May have a perpetual or limited existence. 

7. May carry on its business in any part of the world. 

8. May have a capital stock of any amount, being not 
less than $2000. 

9. May begin business when $1000 of capital stock is 
subscribed, and this subscription need not be paid until the 
J3oard of Directors so direct. 

10. May hold and own stock, bonds, etc., of other cor- 
porations, as trustee or otherwise, and vote on the stock so 
held by it. ♦ 

11. May have two or more kinds of stock with such con- 
ditions as may be desired. 

12. May easily be dissolved. 

13. May merge or consolidate with any other corporation. 

14. May easily increase or decrease its capital stock. 

15. May hold assets and create liabilities to an unlimited 
extent, unless limited in the Charter or By-Laws. 



Over-Capitalization and Publicity 223 

16. May organize with three or more persons as incor- 
porators who may reside in any part of the world" 

The necessity for publicity, as well as the facts con- 
cerning which the public have a right to demand knowl- 
edge, have been well set forth by G-overnor Koosevelt in 
his annual message to the New York Legislature in Janu- 
ary, 1900. After declaring that there was absolute neces- 
sity for courageous and effective remedial legislation upon 
the subject of trusts, he wrote as follows: 

" The first essential is knowledge of the facts, publicity. Much 
can be done at once by amendment of the corporation laws so as 
to provide for such publicity as will not work injustice as between 
business rivals. 

"The chief abuses alleged to arise from trusts are probably the 
following: Misrepresentation or concealment regarding material 
facts connected with the organization of an enterprise; the evils 
connected with unscrupulous promotion; over- capitalization; un- 
fair competition, resulting in the crushing out of competitors who 
themselves do not act improperly; raising prices above fair com- 
petitive rates; the wielding of increased power over the wage- 
earners. Of course none of these abuses may exist in a particular 
trust, but in many trusts, as well as in many corporations not or- 
dinarily called trusts, one or more of them are evident. Some of 
these evils could be partially remedied by a modification of our 
corporation laws. Here we can safely go along the lines of the 
more conservative New England states and probably not a little 
further. Such laws will themselves provide the needed publicity 
and the needed circumstantiality of statement. 

" We should know authoritatively whether stock represents 
actual value of plants or whether it represents brands or good will, 
or, if not, what it does represent, if anything. It is desirable to 
know how much was actually bought, how much was issued free 
and to whom, and, if possible, for what reason. In the first placey 
this would be invaluable in preventing harm being done as among 
the stockholders, for many of the grossest wrongs that are per- 
petrated are those of promoters and organizers at the expense of the 
general public who are invited to take shares in business organiza- 
tions. In the next place, this would enable us to see just what the 
public have a right to expect in the way of service and taxation/' 



224 The Trusts 

It is a rare tribute to the practicability of Governor 
Koosevelt's suggestions which he endeavored to have em- 
bodied in suitable legislation, that the present Democratic 
Comptroller of the city of New York, Mr. Bird S. Coler, 
at present the most conspicuous candidate for the Demo- 
cratic nomination for Governor during the coming cam- 
paign, has now thrown the weight of his influence toward 
a solution of the trust problem, substantially the same as 
that recommended by the Governor in his message. It is 
most fortunate that that element in both parties which 
stands for conservatism in business matters, but for vigor- 
ous purity in politics, is in such substantial accord. All 
men will agree with Mr. Coler in his statement that the 
state being the power which authorizes the corporation 
to do business under a special charter or grant of privilege, 
should stand ready to protect the individual in his rights, 
and that a knowledge of the corporation's business by the 
public is necessary for the proper protection of the public. 
Just as the state, that is, New York State, has long 
exercised the right to inspect the business and standing 
of life and fire insurance companies, just as thd National 
Government inspects and examines banks, so now should the 
state demand of all corporations created by it or permitted 
by it to do business within its limits, su<2h publicity as 
shall enable the people to ascertain whether or not the 
corporate powers and privileges are being used to oppress 
the people. This government inspection of corporations 
is the plan of dealing with trusts that Mr. Coler advocates, 
and is the plan which he has urged the Democrats of every 
state to favor in the platforms to be adopted by them at 
their conventions during the ensuing year. The State of 
Now York may deem itself peculiarly fortunate that Mr. 
Coler should so far endorse the views which in his annual 
message Governor Roosevelt had expressed, and that a 



Over-Capitalization and Publicity 225 

possible, if not probable, Democratic candidate for the 
governorship, should urge the same kind of statutory en- 
actments, for it gives promise of united action and of a 
continuous plan of campaign, regardless of any political 
somersaults that may occasion a change of party admin- 
istration. Mr. Coler's public statement concerning trusts 
was made on or about May 1, 1900. How much in har- 
mony with him Governor Koosevelt is, can be seen by the 
following utterance of the Governor made in January of 
that year: 

" Where a trust becomes a monopoly the state has an immediate 
right to interfere. Care should be taken not to stifle enterprise or 
disclose any facts of a business that are essentially private; but 
the state for the protection of the public should exercise the right 
to inspect, to examine thoroughly all the workings of a great cor- 
poration just as is now done with banks, and whenever the inter- 
ests of the public demand it, it should publish the results of its 
examination. Then, if there are inordinate profits, competition or 
public sentiment will give the public the benefit of lowered prices, 
and if not, the power of taxation remains. It is, therefore, evident 
that publicity is the one sure and adequate remedy which we can 
now invoke. There may be other remedies, but what these others 
are can only be found out by publicity, as the result of investiga- 
tion. The first requisite is knowledge, full and complete." 

It is to be hoped that Comptroller Coler will succeed in 
persuading the Democrats of New York, as well as of all 
the other states in the union, to adopt his anti-trust plank 
and endorse the legislation suggested by Governor Roose- 
velt and himself, for if all parties can unite in advocating 
such legislation, it is unquestionable that a great deal can 
be done to abolish the evils attendant upon trusts. 

What degree of publicity shall be required beyond state 
inspection is a question as to which there will be a variance 
of opinion. Everyone is willing to concede that there are 
many private matters as to which trusts and corporations 



226 The Trusts 

should not be asked because important business secrets 
would be divulged. The publicity that is required of one 
corporation must be required from all corporations simi- 
larly situated. It is contended by many that that pub- 
licity as to any matter concerning a corporation which is 
acceptable to every stockholder is sufficient publicity to 
answer all the requirements of the community. We are 
inclined to believe that this proposition is true, although 
perhaps the bondholders should be entitled to the same 
information. It tends to make absolutely public all mat- 
ters relating to the very large corporations, while it leaves 
the affairs of the small corporations known only to the few 
connected with them. If a corporation has but five stock- 
holders, ordinarily it will be a corporation of small capital- 
ization and, at any rate, one which affects the people in very 
few respects. A corporation with that number of stock- 
holders will not be one whose securities are dealt in upon 
the stock, exchange. It will not appeal to the investing 
public for financial assistance. It will not try to float 
bonds or to list its stock. Ordinarily, it will have no 
dominant control over any industry. Ordinarily, it will 
have a great number of competitors, and will be in no 
sense a monopoly. On the other hand, if a corporation 
has a thousand or more stockholders, as do all our greaf 
industrial trusts, and if every one of these thousand stock- 
holders have full and accurate information as to the af- 
fairs of the company, the public will have the same knowl- 
edge, because of the absolute impossibility of a thousand 
men keeping these matters secret. It has been well said: 
" Publicity to all of the stockholders is practically publicity 
to the world, and the public need not be alarmed about a 
lack of publicity in any corporation where every essential 
fact concerning its inception, organization, management, 
and affairs is known to every stockholder." What objec- 



Over-Capitalization and Publicity 227 

tion can there be to a statute giving to every stockholder 
the right to expect information concerning the property 
of which he is one of the owners? It is often said that 
the corporation is merely a form of private business organ- 
ization, and that the public has no right to know these 
private business matters; but it should be borne in mind 
that the publicity here contended for is publicity only to 
stockholders themselves. " But/ 5 say the objectors, " pub- 
licity to all stockholders of a great corporation is publicity 
to the whole world and, in fact, it is your desire to get 
information for the whole world that leads you to seek to 
compel the affairs of the corporation to be made known to 
all of its stockholders." " The plan proposed by you," 
they say, " will permit any intrusive and inquisitive person, 
by buying a few shares of stock, to expose the affairs of 
the corporation against the wishes of the great majority 
of its stockholders." The reply that immediately occurs is 
that if great corporations are unwilling that every stock- 
holder should have full information concerning the affairs 
of the company in which they hold stock, then they should 
not ask the public to take stock in it. If a man with $100 
interest in a trust is not entitled to knowledge as to the 
way in which this $100 worth of his property is being man- 
aged, corporations should not seek to induce people to in- 
vest $100. If such a sum is too small an interest, then let 
the par value of the shares be greater, say $1,000 instead 
of $100, or, what is the same thing, sell to no person less 
than ten-share lots. Perhaps a requirement that a person 
owning $10,000 worth of stock, or that a group of persons 
owning in the aggregate $25,000 worth of stock, should be 
granted explicit information upon reasonable demand, 
would answer all practical purposes in the case of our 
very great corporations quite as well as a requirement that 
every single stockholder should have this privilege. 



228 The Trusts 

Whatever the nature and the degree of the publicity 
that is required, it must, in order to cope with the evils of 
trusts, embrace a system of state inspection after the man- 
ner of our bank examinations, as recommended by Gov- 
ernor Eoosevelt and Comptroller Coler. Furthermore, the 
state and the nation must supplement this publicity by 
detailed statistics which will state for each great trust the 
cost of production; prices, both wholesale and retail, for 
the articles made by these trusts; rates of wages; output 
and capacity; comparative quality; number of hands em- 
ployed; extent of competition, both foreign and domestic, 
together with such other information as may have a bear- 
ing upon the question. 

It may be said that past experience with trusts does not 
augur well for the success of any movement to make them 
reveal the desired information. But there has been found 
little difficulty in enforcing the laws for the inspection of 
banks and insurance companies, and the money power of 
these great financial institutions is hardly less than that 
of the trust, and their business secrets are matters that 
should be quite as jealously guarded. 

It is unquestionably true that publicity will largely rem- 
edy the evil of over-capitalization, but possibly it will not 
prove to be a complete cure. If insufficient, direct legislation 
against the evil should be tried. There can be no question 
that over-capitalization gives rise to mtoy evils; and 
that in no way is it of any material benefit, either economi- 
cally or financially. If a corporation were formed upon a 
basis of a stock issue, representing only the actual value of 
its property, certainly no harm could be done. Such a 
basis, as has been well said by The Journal of Commerce, 

" would serve all the purposes of the manufacturers who combine 
to avert competition and to secure the economies of single manage- 
ment, rather than to sell to the public titles to surplus profits that 



Over-Capitalization and Publicity 229 

will be earned in the future if trade continues to prosper and com- 
petition can be restrained." " It is impossible," this paper says, " to 
resist the conviction that most of the trusts are very much over- 
capitalized, and if this be the case, the value of the common stock 
is based upon conditions that may change rapidly, and that can 
hardly be expected to prove permanent. A curtailment of earnings 
would lower the value of stocks which are extensively used as col- 
lateral for loans, and this is one of the dangers of trust finance as 
it is practiced." 

The interests of the public are too much at stake to per- 
mit corporations to masquerade around under a capital- 
ization of tens of millions, when their actual assets are 
but small fractions of these sums. The people at large 
cannot afford to accept the statements of interested specu- 
lators as to the value of their properties, which they ask 
the people to take stock in. The state in its sovereign 
capacity cannot afford to give a charter or a certificate of 
incorporation to a company capitalized at $10,000,000 — 
which capitalization, in itself, in the minds of many, is a 
certificate of valuation by the state — unless the state has 
taken every means to prevent the issue of stock except for 
actual cash or in exchange for property which is taken at 
its fair value as determined by competent and disinterested 
parties, or by state officials acting in a judicial or quasi- 
judicial capacity. There is an English law concerning the 
issue of stock in payment of services and property which 
American states might copy to their advantage. That 
law provides that all stock which is issued shall be held sub- 
ject to payment, in full, in cash in the hands of whomso- 
ever it may be, unless before the issue and allotment there- 
of, a contract shall be filed in the registered office of the 
company, which contract shall disclose in detail the con- 
sideration in the way of services or property for which the 
stock shall be issued in lieu of cash, and that, in the event 
of such filing of such contract, that stock can be issued for 



230 The Trusts 

property or services rendered to the amount of the par 
value of this stock. 

When all that can be done by direct legislation to pre- 
vent over-capitalization is done, we will still feel the need 
of publicity, because dishonest officers of great corpora- 
tions, even though every share of their stock shall have 
been issued for actual cash, have infinite ways of plundering 
the public if allowed to act secretly and under cover. 

One of the serious evils associated with corporate man- 
agement to-day is the speculation by officials and directors 
of companies in the stock of their own corporations. It is 
unnecessary to enlarge upon the evils of such a practice. 
It would be pernicious, even if this speculation were con- 
fined to the purchase of the stocks of the company with a 
view to their subsequent increase in value, for constant 
speculation even of this character would mean an interfer- 
ence with the discharge of the proper duties of the officers, 
and there would always be a temptation for the speculating 
official to conceal from other stockholders information con- 
cerning the true value of their property. The temptation 
would be so strong that unquestionably there would be not 
only lack of information, but misinformation and the cir- 
culation of all sorts of reports for the purpose of depress- 
ing the market price of the stocks. But speculation on 
this side of the market would have at least one redeeming 
feature, and that is that the officials would actually be 
trying to improve the value of the property entrusted to 
them. Stock speculation, however, quite as frequently 
takes the form of " short sales," that is, agreements to sell, 
at a certain price, that which one does not possess with the 
expectation of purchasing it later at a lower price, and 
thereby fulfilling the selling contract. The temptation in 
speculation of this character is to do everything that is 
possible to)depre88 the value of the property which has 



Over-Capitalization and Publicity 231 

been sold and which one must buy to make good the de- 
livery. It may be impracticable to frame any statute that 
will actually stop this practice, but it is an evil, the in- 
jurious effect of which cannot be overestimated, and one 
which should be prevented at any cost. Here, again, pub- 
licity appears to be the most effective remedy, because 
when all stockholders have that same degree of knowledge 
concerning the affairs of the company which the speculat- 
ing officer has, then will his ability to influence the market 
and to deceive intending purchasers or sellers be ended. 

It is to be borne in mind that the publicity that is re- 
quired is not only honest information by the officers of cor- 
porations which are already founded, but complete specific 
and detailed statements by promoters and all others who 
engage in organizing and establishing trusts. 

Publicity may not be a complete cure, but it will be a 
remedy not only for the evils of over-capitalization, but for 
all the evils and dangers of trusts. If publicity is ob- 
tained, prices cannot long be kept unduly high, dividends 
cannot be swelled by extortion, stocks cannot be made to 
appear as having an earning power greater or less than 
what they actually have, for competition will be sure to 
set in. If there is publicity, the stockholders, little as 
well as big, will have exact knowledge of the conditions 
of their property; and mismanagement by officers and 
directors, and the betrayal of the trusts reposed in them, 
will be rare. Publicity is the best remedy to try, for it 
will tend to stop the evils of corporate mismanagement, 
whether connected with companies that are fairly capital- 
ized or those that are over-capitalized. With perfect pub- 
licity, there would possibly be little evil in over-capital- 
ization itself. If we know the real and true earning power 
of the stock, its real dividend-paying ability, a market 
price will be fixed for it based thereupon; but without such 



232 The Trusts 

knowledge the price may be greatly more or even greatly 
less than it is worth! The insiders are the ones who profit; 
the public the ones who suffer. 

One great need of the day, then, is publicity of the 
affairs of corporations. Another is more strict control 
over corporation methods. We should enact and enforce 
statutes that will prevent the evils and dangers of corpor- 
ate mismanagement and which will provide the most strin- 
gent penalties for the dishonest practices of which corpor- 
ation officers are so frequently guilty. The people must 
rouse themselves from the lethargy into which they ha\e 
sunk. Instead of looking indifferently upon the losses sus- 
tained by a person through the rascality of the officers 
of corporations in which he is interested, and instead of 
regarding him merely as a party who has been " burned;' 
the people must realize that all classes, from the rich in- 
vestor to the laborer with a few dollars in the savings bank, 
are vitally interested in the attainment of a higher stand- 
ard of honesty in dealing with corporate property. The 
wrecking of public corporations, with a resultant loss to 
thousands of innocent and deluded stockholders, should be 
treated as a crime deserving the severest punishment. 



CHAPTER XII. 
WHOSE FAULT IS IT? 

It would be most unfortunatte if a problem so momen- 
tous and so complex as that produced by trusts, should 
become a question of partisan politics. It is so great that 
it needs all the wisdom, all the patience, all the calmness, 
all the conservatism, and all the courage of all the people. 
Yet, just as trusts have of late been so inconsiderately de- 
nounced, it is becoming more and more the fashion for 
each party to lay the evil of trusts at the door of the other. 
The Democrats say that trusts are the outgrowth of Re- 
publican policy; the Republicans charge that the Demo- 
crats have absolutely refused to unite with them in effec- 
tive legislation against trusts, or in an attempt to get the 
U. S. Constitution amended so as to give Congress com- 
plete and ample power. 

The Democrats are very fond of denouncing the Re- 
publicans as the friends of trusts. The latter are declared 
by them to be the allies of great wealth. Their policy of 
aiding, by means of a protective tariff, in the building up 
of American manufacturing, and the consequent develop- 
ment of American resources, which has done so much to 
make this nation wealthy and this people prosperous, has 
been denounced as "the mother of trusts." 

The thief who is being pursued through the city streets 
is very apt to point to some one ahead of him and begin 
a pursuit of that person, with loud cries of " stop thief." 

233 



234 



The Trusts 



The Democratic denunciation of the Kepublican party as 
the party of trusts, is the greatest of all " stop thief " cries. 
They are quite as guilty as Eepublicans in the wickedness 
of trusts. The truth is that the Democrats as a party and 
as individuals are no more and no less censurable on the 
trust question than the Eepublicans. Trust owners, or- 
ganizers, and promoters are no more confined to the Ke- 
publican party than are butchers, or steel workers, or 
bakers. Unquestionably, many trust organizers are Ee- 
publicans, but there is an equal number of Democrats like- 
wise interested. 

Governor Atkinson, in his address at the Chicago Trust 
Conference, very frankly said that trusts are not confined 
to any one political party. His words were: " I find about 
as many Democrats in trusts in the United States as Ee- 
publicans, and I find at least two of the mammoth trusts 
of this country are, in a sense, Democratic trusts." If 
trusts are corrupt and degenerate, the Democrats are as 
deep in the mud as the Eepublicans are in the mire. Per- 
haps the greatest of the Napoleons of finance now engaged 
in the business of consolidating and combining is a former 
Democratic Secretary of the Navy. Not a month passes 
that the press reports do not mention his connection 
with some great trust. This spring has witnessed the 
absorption by the Metropolitan Street Eailway Company 
of New York City of the Third Avenue system, its only 
rival. All the surface railways of that city — New York 
City proper — are now under the control of this one cor- 
poration of which this ex-Secretary of the Navy is the lead- 
ing financial genius. The Standard Oil Company is con- 
sidered the greatest of trusts. It is the one accused of the 
most evil practices. It has even been charged with interfer- 
ing in politics. The most specific charge was the one 
which alleged that through its influence a certain Demo- 



Whose Fault is it ? 235 

crat of Ohio, was elected United States Senator. Ex- 
Governor Flower, ex-Secretary of State Olney, and hosts 
of others whom the Democratic party has honored and en- 
trusted with office, have been active in promoting or man- 
aging trusts and consolidations. This is perhaps no re- 
flection on these successful gentlemen in the eyes of any 
person, except in the eyes of those who denounce trusts. 
Very likely trusts should be denounced, but people in 
denouncing should bear in mind the scriptural injunction 
as to pulling motes out of their brother's eye while beams 
are in their own eyes. 

During the last-two months that have just passed (April- 
May, 1900) two trusts have been very much before the 
public, the American Steel and Wire Company and the 
American Ice Company. The head of the former has been 
accused of circulating misleading reports concerning the 
condition of his company and its business prospects, and 
of arbitrarily closing many of the mills of the company to 
make it appear that there had been an over-production and 
thereby to depress the price of stock. It is only fair to say 
that he has been acquitted. This man is a Eepublican. 
The American Ice Company, the other trust that is in the 
public eye at present, has as near a complete monopoly, in 
a certain locality, of one of the greatest of life's necessities, 
as any trust ever secured. Taking advantage of docking 
facilities which it has been able to acquire and which 
were of an exclusive character, and of its possession of 
nearly the entire supply of ice available for New York 
City, and of all of the important ice-making establish- 
ments, it has doubled the price of ice, — an extortionate 
increase, yielding to the trust inordinate profits. Of all 
monopolies this is the most merciless. It lays its burden 
most heavily on the poor, the sick, and the young. The 
fever-stricken patient is dealt the heaviest blow, but even 



236 The Trusts 

the strong and well, find health and life, in the warm sum- 
mer days, endangered by food and drink that are tainted 
because of lack of ice to preserve its wholesomeness. Trusts 
have often been characterized as " octopi," but the Ameri- 
can Ice Company is the most vampire-like sucker of human 
blood that has ever been incorporated. In its organization, 
as well as in its methods, it exemplifies the worst evils of 
trusts; for banded together in this company, with others, 
are several whose official duties make them the guardians 
of the people's interest. It is freely charged, and to this 
day it has never been denied, that many officials of New 
York City are stockholders, and that it is the exceptional 
privileges which their influence has given to the trust that, 
with other powers, make it so monopolistic. It is charged 
that persons connected with the Municipal Assembly or the 
Common Council of New York are stockholders, and yet at 
one time the practical method of immediate relief seemed 
to be the establishment by the municipal government of 
the city of New York of city plants for manufacturing 
ice. It is charged — and not denied — that many of the 
judges of New York City are or have been stockholders of 
the American Ice Company, and yet not only is that com- 
pany to-day being arraigned before the people as a merci- 
less corporation, but criminal proceedings are pending in 
the inferior courts which may — or, at least, might have — 
come before these judges for trial or review. Furthermore, 
proceedings are pending before the Attorney-General of 
the State, preparatory to an action to procure a dissolution 
of the corporation. Should such an action be instituted, 
it might bo the duty of some of these judges to try it, and 
it would, perhaps, have been brought before them, had not 
rumor associated them with the trust. Trusts invariably 
spok to ally themselves with the dominant political party 
of the locality in which they are to operate, and the Amcri- 



Whose Fault is it? 237 

can Ice Company is unquestionably a Democratic trust, in 
the sense of having among its principal stockholders very 
many of the leaders of that party in Greater New York. 

In the face of active participation in a trust that exer- 
cises its great powers with the inhuman greed which has 
characterized the American Ice Company, denunciations 
of trusts in platforms framed by these men, or the advocacy 
by them of statutes filled with prohibitions of trusts, can 
be considered only as professions which do not square with 
performance. When the trust offenders are being excori- 
ated, Eepublicans should not be denounced as specially 
guilty or as sinners in this respect above all other men. 
The pot should not call the kettle black. 

Not only are individual Eepublicans no more interested 
in trusts than Democrats, the Eepublicans have not been 
particularly favorable towards trusts in their official party 
statements, — their platforms. The New York World 
Almanac for 1900, gives the following planks from plat- 
forms adopted at Eepublican State Conventions held in 
1899, in so far as they relate to trusts: 

Iowa. — To maintain the welfare of the people is the object of 
all governments. Industry and commerce should be left free to 
pursue their method according to. the natural laws of the world, 
but when the business aggregations known as trusts prove hurtful 
to the people they must be restrained by National laws, and if need 
be, abolished. 

Kentucky. — We pledge the Eepublican party of Kentucky to 
the enactment of all such laws as may be necessary to prevent 
trusts, pools, combinations or other organizations from combining 
to depreciate below its real value or to enhance the cost of any 
article, or to reduce the proper emoluments of labor. 

Maryland. — We strongly favor laws to successfully suppress 
trusts and all combinations which create monopoly. It was the 
Republican party which passed the Federal law against trusts and 
which is enforcing it so far as states' rights permit. 

Massachusetts. — The Republican party of Massachusetts is un- 



J38 The Trusts 



qualifledly opposed to trusts and monopoly, and the capitalization 
of fictitious and speculative valuations, and reiterates its declara- 
tion in the platform of 1894 against stock-watering in all forms, 
and points to the existing legislation, and especially to the anti- 
stock-icatering laics of that year passed by a Republican legisla- 
ture and signed by a Republican governor, as proof of its progress, 
sincerity, wisdom and courage upon this issue. It believes that 
similar laws enacted by all the states in connection with the Fed- 
eral Trust law already passed by a Republican Congress would put 
an end to the danger from the growth of great combinations and 
trusts. 

Nebraska The Republican party now, as always, opposes trusts 

and combinations having for their purpose the stifling of competi- 
tion and arbitrarily controlling production or fixing prices, but we 
also recognize that legitimate business interests, fairly capitalized 
and honestly managed, have built up our industries at nome, given 
the largest employment to labor at the highest wage, and have 
enabled us to successfully compete with foreign countries in the 
markets of the world. 

Ohio. — We commend tlie action of the Seventy-third General 
Assembly of Ohio in passing the stringent law now on our statute 
books, prohibiting the organization of t7*usts, and we denounce such 
unlawful combinations as inimical to the interests of the people. 

The platforms adopted this year of 1900, show that both 
parties are alike unfavorable to trusts. There is hardly 
a single state in which during the present year both politi- 
cal parties have not denounced trusts. The declaration of 
the Republican party in its National platform adopted at 
Philadelphia, on June 20th, is as follows* 

Wo recognize the necessity and propriety of the honest co-opera- 
tion of capital to meet now business conditions and especially to 
extend our rapidly increasing foreign trade, but we condemn all 
conspiracies and combinations intended to restrict business, to 
create monopolies to limit, production, or to control prices, and favor 
such Legislation as will effectively rot rain and prevent all such 

abuses, protect, and promote competition and secure the rights of 
producers, laborers and all who arc engaged in industry and com- 
merce. 



Whose Fault is it ? 239 

Republicans show as little real friendship for trusts as 
do the Democrats. Their platforms do manifest a willing- 
ness to study into the new problems occasioned by them. 
They do show a disposition not to rush headlong on a 
course that may prove harmful, but they manifest quite as 
much of a desire to remedy existing evils as do the Demo- 
crats, and they are able to show legislation of a practical 
character. 

It is still questionable just what sort of legislation should 
be enacted. The abundance of laws against trusts passed 
by any party, does not conclusively prove that that party 
has conferred a service on the people. Yet Republican leg- 
islatures have been quite as prolific in trust legislation as 
have the Democratic. The so-called " anti-trust act " of 
the United States, being the act passed in 1890, entitled 
" An Act to Protect Trade and Commerce against Unlaw- 
ful Restraint and Monopoly/' was introduced by, and its 
passage due to, that life-long Republican, John Sherman, 
and it is known by his name. But the Republicans have 
not been content with the Sherman Act. The present ses- 
sion of Congress has seen them diligently trying to do 
something which would be an efficient remedy. They have 
proposed an amendment to the Constitution giving to the 
Federal government absolute power over corporations, 
trusts, and combines, even to the extent of destroying 
them; and have introduced a bill of the most drastic 
character, amending the existing Sherman Act. It is use- 
less here to consider whether the proposed law is wise or 
not, but this much can be truthfully said: it is no more 
drastic, yet quite as drastic, as the denunciations of trusts 
in Democratic platforms. In the Judiciary Committee, 
the Democrats have voted solidly against this proposed 
amendment to the Constitution, on the ground that it is 
an invasion of state rights; and more recently every 



240 The Trusts 

Democratic member of the House, except five, has voted 
against this proposed amendment. As it required a two- 
thirds vote, it was killed. Every well-informed person 
knows that if the remedy against trusts is to be found in 
legislation, it must be in Federal legislation. It is abso- 
lutely impossible to procure uniformity of legislation in 
all, or even in very many, of the forty-five states of the 
Union, and if one state permits the creation of great cor- 
porate trusts within its bounds, then under the various 
clauses of the United States Constitution as to interstate 
commerce being regulated only by Congress, and as to the 
rights of persons to life, liberty, and property being in- 
violable by state legislatures, and under that comity which 
has always existed between states, notwithstanding the 
fact that states may possibly have the right to impose upon 
corporations created by other states the same restrictions 
which they place upon their own corporations before al- 
lowing them to maintain offices or acquire domiciles within 
their borders, the states, nevertheless, cannot effectively 
prevent these corporations created by other states from 
doing business with the citizens of each and every state. 
Trust legislation, to be effective, must be National. Not 
only do the political relations of the states towards each 
other and towards the Union, as established by the Con- 
stitution, necessitate this, but the growing intimacy of 
interstate business relations requires it. # One's trade and 
market are now in no way bounded or limited by state 
lines, and the laws affecting business organizations should 
be as extensive in their jurisdiction as our domestic trade. 
If state laws cannot reach every person and corporation 
that has a right to trade in that state, we must have 
National laws. If the Democracy is so attached to the 
theory of state rights as to vote against giving to the 
Federal government, power over the trusts which to-day 






Whose Fault is it? 241 

spread over the whole country and which do business in 
all sections, they sacrifice the practical to the theoretical, 
and show the utter incapacity of their party to deal with 
new and vital questions of momentous importance. No 
longer need the party which fears to give to the Federal 
government power to deal with trusts, prate of its anti- 
trust notions, or seek to make it an issue of National poli- 
tics. " State rights " is a theory which every invention 
that facilitates transportation and travel tends to shatter. 
He who lets it stand in the way of efficient remedies for 
actual evils, is a " mister man-afraid-of-a-shadow." 

In an article in The North American Revieiv for Septem- 
ber, 1899, on the Legal Aspects of Trusts, Jos. S. Auer- 
bach says: 

"Neither political party offers any protection (to trusts). Each 
apparently would out-do the other in its bid for public support. 
New York, if shouting less, is about as active as Texas. Democrats 
legislate and Republican governors sign; Republicans legislate and 
Democratic governors sign." 

The facts of the case certainly do not justify the Demo- 
crats calling the Eepublican party, the party of trusts. 

The evils of trusts, as has been particularly pointed out 
by Bourke Cochran, are largely the evils of corporations. 
"Which are the states that to-day are most lax in their con- 
trol of corporations? Under the laws of which states do the 
great trusts seek incorporation? Democratic New Jersey 
and Democratic Delaware. Mr. Bryan, at the Chicago 
Trust Conference, attempted to parry a thrust on this 
point, intruded into his address by a query from the gal- 
lery, with the remark that New Jersey and Delaware were 
not Democratic in 1896. But until 1895 New Jersey had 
had but one Eepublican Governor, and that was in "war 
times." It was the most rock-ribbed Democratic state in 
the North. This fact is of interest in connection with the 



242 The Trusts 

following from a recent able address by Edward Quinton 
Keasby, a well-known New Jersey lawyer, upon the cor- 
poration laws of that state and upon trusts: 

" The first fact to be noted in the inquiry into the policy of New 
Jersey with regard to corporations is that there is nothing of much 
consequence that is neic in her existing laws. The large companies 
lately incorporated were organized under a general law which, in its 
substantial features, has been in force ever since 18^6, and which 
has been unchanged in any very important particulars during the 
last twenty-five years. 

"... A general act, as I have said, was passed in 1846, and the 
power to grant special charters was abolished in 1875, and in that 
year a revision of all the general acts concerning corporations was 
made and permission was given to any persons to form corporations 
for any lawful business or purpose whatsoever. The provisions of 
that act were substantially the same as those of the earlier statutes, 
and these provisions have remained substantially unchanged until 
the present day" 

Democrats who assail trusts ought not to charge their 
existence up to Eepublicans. Eeference has been made in 
a former chapter to the laxity of the laws of Delaware. 
Over-capitalization is the chief cause of the great trusts. 
It encourages " promoters/' gives to them a chance to 
make enormous fortunes, but is an irresistible temptation 
to wholesale frauds. If the worst of the trusts are to be 
6 stroyed, if the worst that is in trusts is to be eliminated, 
the laws of New Jersey and Delaware ought to be amended. 

Of late it has been frequently charged that the Repub- 
lican party is responsible for trusts because it has advo- 
cated a protective tariff, and the tariff, it is said, shuts out 
foreign goods which might compete with trusts and destroy 
their power. Mr. Eavemeyer, the sugar king, has testified 
before a Senate Committee that "the tariff is the mother 
of trusts." The assertion coming from one whose efforts 
to secure protection, when the Wilson tariff bill was passed, 



Whose Fault is it ? 243 

caused such a commotion, seems incongruous; and it is im- 
possible to resist the conclusion that Mr. Havemeyer has a 
grudge against the tariff because it makes him pay too 
much for raw sugar, or because the shoe pinches in some 
other spot. Mr. Havemeyer undoubtedly feels that his 
powerful trust could stand free trade in refined sugar bet- 
ter than some of his weak competitors, and he probably has 
little objection to free trade in raw sugar, since it would 
tend to give a death-blow to the beet-sugar industry. It 
should not be forgotten that even if some of the trusts 
have taken advantage of the tariff, the Eepublican party is 
not to be blamed therefor. A great majority of the very 
large trusts have been formed within three years. There 
has not yet. been ample time to see whether trusts are 
taking advantage of the tariff, or, if that is the case, to 
enact legislation to correct the abuse. The tariff plank of 
the Eepublican platform, 1896, correctly said of the tariff 
that 

* in its reasonable application, it is just, fair and impartial, equally 
opposed to foreign control and domestic monopoly, to sectional dis- 
crimination and individual favoritism." It also declared : " We re- 
new and emphasize onr allegiance to the policy of protection as 
the bulwark of American industrial independence and the founda- 
tion of American development and prosperity. This true American 
policy taxes foreign products and encourages home industry; it 
puts the burden of revenue on foreign goods ; it secures the Ameri- 
can market for the American producer; it upholds the American 
standard of wages for the American workingman; it puts the 
factory by the side of the farm and makes the American farmer 
less dependent on foreign demand and price; it diffuses general . 
thrift and founds the strength of all on the strength of each." 

Not only has the Eepublican party in its platform de- 
clared against any tariff which was creative of monopolies, 
but some of its most eminent members have spoken em- 
phatically in the same strain. John Sherman, the former 



244 The Trusts 

Eepublican Secretary of the Treasury, and for years -Re- 
publican Senator from Ohio/ has used the following lan- 
guage: 

" The primary object of a protective tariff is to provide for the 
fullest competition by individuals and corporations in domestic 
production. If such individuals or corporations combine to advance 
the price of the domestic product and to prevent the free result of 
open and fair competition, I would without a moment's hesitation 
reduce the duties of foreign goods competing with them, in order 
to break down the combination. Whenever this free competition is 
evaded or avoided by combination of individuals or corporations, 
the duty should be reduced and foreign competition promptly in- 
vited." 

Charles Foster, Eepublican ex-Governor of Ohio and 
ex-Secretary of the Treasury, has declared himself as fol- 
lows: 

" While I have always been, and am yet, a thorough believer in 
the protective policy, I regard the appropriation of the tariff to 
enhance the price of any product of the country, as a misuse of the 
purpose intended. When any trust shall avail itself of a tax upon 
imports to enhance the price of the product, then the tax should 
be modified or wholly removed." 

The tariff has, perhaps, indirectly been the cause of 
trusts. It has stimulated the building of factories and 
mills in various industries. It has made a profit reason- 
ably certain, so far as foreign competition goes; but, as in 
every business, far more competitors bave # sprung up than 
were needed to supply the market. Over-production has 
ensued. Profits have been lost, plants have proven poor 
investments, and, to save themselves from bankruptcy, 
manufacturers have formed trusts. It is the fierceness of 
home competition that has caused the trusts. But to say 
that the tariff has boon in this way responsible for trusts 
is like saying that food is responsible for apoplexy and 
goub. since it is usually the hearty eater who is affected 



Whose Fault is it ? 245 

with these diseases. The trouble is not in the food, but in 
over-eating. It is not always in the tariff. It is fre- 
quently in excessive competition. 

It is said, however, that the tariff is the defense and prop 
of trusts, if not their cause; that by shutting out the for- 
eign product it makes it all the easier for the American 
trust to monopolize the article and to maintain high 
prices. It is charged that an iniquitous tariff is the sup- 
port of the trusts, and Mr. Lawson Purdy, of the New York 
Tariff Eeform League, asserts that of the more than four 
hundred trusts enumerated in The Commercial Year Book, 
more than two-thirds are directly affected by the tariff and 
that there are very few of them that do not get some tariff 
assistance directly or indirectly. It is unquestionably true 
that the existence of the tariff tends to shut out foreign 
competition and to enable the home producer for a time 
to charge high prices, that is, higher than those of Euro- 
pean countries, with their poorly paid labor; but in a 
country so great as ours, and with capital so abundant, 
there is always a probability of vast internal competition, 
provided the tariff is maintained. If the tariff is abolished 
and if foreign producers can, in fact, produce so as to sell 
more cheaply, then there is little hope of the springing 
up of new domestic competition. The means which the 
tariff reformer would employ for the purpose of reducing 
prices, would mean the destruction of American industries. 

That there have been abuses of the tariff by some of our 
protected industries seems quite certain. It is a well- 
known fact that for many years various lines of manufac- 
tured goods have at times been sold for export abroad at 
lower priqes than at home. Tariff reformers, like Lawson 
Purdy and Byron W. Holt, have made this statement and 
have cited numerous instances as proof of the charge. 

That our export prices have occasionally been lower 



246 The Trusts 

than domestic prices, was admitted in a recent address by 
Samuel Adams Kobinson, of the American Protective 
Tariff League, but his explanation is, that this course was 
exceptional; that it occurred in the four years of depres- 
sion following the free trade triumph of 1892, when Amer- 
ican manufacturers were compelled to sacrifice profits to 
a considerable extent in order to find a foreign outlet for 
their surplus products; that these years, during the admin- 
istration of President Cleveland and the agitation attend- 
ant upon the repeal of the McKinley law and the passage 
of the Wilson tariff bill, so unsettled American business 
affairs that the period became one of national over-produc- 
tion and under-consumption; that the purchasing and con- 
suming power of the nation, as a result of the stagnation 
of business, became greatly diminished, and, in conse- 
quence, manufacturers and other producers were compelled 
to reduce prices below the point of fair profits in order to 
obtain ready money, and in this way only were they able 
to keep their plants in operation and their labor employed. 
Goods were marketed abroad, so Mr. Eobinson concedes, at 
figures which left little or no margin of profit, and some- 
times at an actual loss. But it is contended that now, 
with prosperity at hand, export prices are " much nearer 
on a parity with domestic prices;" and the following rea- 
sons are given for the allowance by manufacturers of 
greater discounts on goods sold for export than on those 
sold to domestic consumers, viz., " spot cash payment for 
export goods, whereas in domestic trade long credits are 
the rule and spot cash the exception; and the additional 
fact that in marketing his product through the export 
trade, the manufacturer is at no expense for advertising, 
maintenance of agencies and other items that add to the 
cost of distribution, amounting in the aggregate to fully 



Whose Fault is it ? 247 

the difference between the export prices and domestic 
prices." Such is Mr. Kobinson's argument. 

While occasionally there may be special circumstances 
and exceptional conditions which justify American manu- 
facturers in these discrepancies in prices, and while it is 
true that after a given quantity has been manufactured a 
surplus may be made and sold at a lower rate, yet the pre- 
sumption must always be that when American goods are 
shipped in large quantities abroad, and sold for less than 
in the home market, the producer is gouging the Ameri- 
can people; and that the tariff is not a necessity to the 
maintenance of such a business, but that it may be a means 
of robbery and extortion. This presumption becomes con- 
clusive when any American product is thus uniformly sold 
abroad. For the head of any industry which has been 
fostered by an American protective tariff thus to rob the 
American people is the case of a dog biting the hand that 
feeds it. It is the people and not the manufacturers in 
such cases that need protection. The continuance of the 
tariff upon an article sold abroad cheaper than at home 
can be justified only by the clearest evidence, brought out 
after the fullest and fairest investigation, establishing be- 
yond a shadow of a doubt that such sales are unusual and 
exceptional; and that the ability to undersell producers 
and other competitors in the foreign markets is due to 
temporary market conditions. 

Although, in all cases where domestic producers have 
built up a foreign trade, and have uniformly sold in a for- 
eign market at a less rate than in the home market, they 
have conclusively demonstrated their independence of the 
tariff, and the tariff should therefore be removed or low- 
ered, yet to advocate free trade or a general reduction of 
tariff duties on all products, or upon the majority of our 
imports, as a cure for trust evils, would be the height of 



248 The Trusts 

folly. It would be a remedy illogical in principle, and it 
would be worse than criminal, because it would be to 
ignore all the lessons of experience. The remedy for trust 
oppression is not to be found in the death of competition. 
But if the tariff is removed so that foreign competition 
may be potent, the foreign competition will crush out 
domestic enterprises, if, indeed, the foreigner is the cheap 
producer and can sell at a lower price, as the would-be 
destroyer of the trusts and the tariff contends. The evil 
of the trust is that it so limits competition as to become 
apparently, if not in reality, a monopoly. The effect of 
the tariff, it is true, is to shut out foreign competition. 
But a century of experience has proven to the people of 
the United States that, while the tariff limits foreign com- 
petition, it has built up and fostered domestic competition. 
The trusts may strive to kill that competition; but our ex- 
perience with them proves that they can not permanently 
do this. It is not possible for them for any length of time 
to destroy even American competition, so great is the 
amount of uninvested American capital, so limitless the 
energy and enterprise of its citizens. The only thing that 
has ever yet been able to kill American competition has 
been the low tariffs which permitted the product of the 
cheap and degraded labor of Europe to displace the product 
of American factories. Any movement to kill trusts by 
the adoption of general free trade cap succeed only by 
stifling American industry. It would kill not only our 
great consolidated enterprises, but all our individual ones. 
Whatever may be the theoretical advantages of free trade, 
the practical experience of the American people has, to say 
the least, made them reluctant to try it. To fight trusts 
with free trade is to conduct a campaign with the smokeless 
factory chimney as the chief weapon; and whatever nation 
makes that attempt, or whatever party advocates such a 



Whose Fault is it ? 249 

contest, is sure to go down in defeat. We Americans pride 
ourselves upon being a practical people. We fancy we 
know a good thing when we see it; we are content to let 
well enough alone. Like the burnt child, we dTead the 
fire. The great panic of 1893, the utter depression of 
business, the stagnation of industry, the wretchedness and 
misery that followed all the uncertainty that was occa- 
sioned by President Cleveland's attempts to change our 
tariff policy, are too fresh in our recollection to induce us 
again to undergo that experience. The present prosperity 
of the country — with our factories and mills all running, 
many of them overtime; with our exports increasing; with 
our credit unquestioned; with the gold of the world flowing 
into our country — is something that we do not lightly care 
to throw away. As we look back over a century of national 
development and industrial progress, we see periods of re- 
curring panics and find that they were always forerun by 
attempts to abolish that system of tariff which aimed to 
protect and foster industry as well as to raise revenue. 
We see that every attempt to reduce the tariff to a purely 
revenue basis resulted in larger importations of foreign 
goods, in diminishing production of American articles, in 
the suspension of industries, in labor unemployed, in 
the reduction of wages, in the loss of business confidence, 
in an outflowing of the wealth of the country, in a decrease 
in the revenues of the government, and uniformly and 
without exception in lessening the consuming powers of 
the people. But whenever there has been a tariff large 
enough to represent the difference between the American 
standard of living for the American workmen and the de- 
graded standard of the labor of foreign countries, we have 
witnessed a revival and activity of American industry; and 
American workingmen have been profitably employed at 
good wages, enabling them to enjoy the comforts of Ameri- 



250 The Trusts 

can civilization and to become self-respecting, independent 
citizens. The government revenues in these times have 
always exceeded the expenditures, money has flowed into 
the country, the prosperity of the manufacturer and wage- 
earner has stimulated the demand for the raw materials of 
the country, and the wealth created by diversified industry 
has brought prosperity and happiness to the whole people; 
and, further, the tariff has always resulted in stimulating 
so many industries that an active domestic competition has 
arisen, and in the end American prices have been reduced 
below those of foreign competitors. 

In the campaign against trusts very much will be said 
against the tin-plate trust. To what extent, if at all, this 
trust is extortionate in its present prices, and to what ex- 
tent the tariff is the cause of it, are questions, the answers 
to whicL involve such a study of market prices that they 
do not fall within the scope of this work. If the tin- 
plate trust is charging an extortionate price — that is, a 
price which will yield more than a fair profit after paying 
good American wages — then let the tariff on its products 
be lowered or even abolished. But merely because the 
price of tin-plate has been greatly advanced during the last 
year and a half, we should not rush headlong to the con- 
clusion that it is due to the tariff. George Gunton, in a 
paper published in Gunton's Magazine for March, 1899, in 
speaking of trusts that were short-sighed enough to take 
advantage of temporary opportunities to tax the public by 
increased prices, said of the tin-plate trust (italics are 
ours): 

"The tin-plate trust is one of these offensive examples. This 
is an industry which practically could not have existed in this 
country but for the legislative aid of the public. Until the tariff 
— a very high one at first — was placed upon foreign tin, the tin- 
plate industry had no existence in the United States, It has been 



Whose Fault is it ? 251 

born and nurtured by the protective aid the public has given it. 
Its very existence is due to the good will and political good sense 
of the United States. The tin-plate trust is one of the ' fool ex- 
amples ' of using the trust organization to put up the price. Of 
course it would be unwise for the public to hamper a really help- 
ful industrial movement because speculative * grabbers ' get tem- 
porary possession; nor should a few mistakes of this kind be per- 
mitted to be used effectively against the protective tariff as a gen- 
eral policy. Nevertheless it would be perfectly safe and the part 
of good policy for Congress to pass a law empowering and instruct- 
ing the Secretary of the Treasury to withdraw the protective duty 
from all products the prices of which are raised by trust organiza- 
tions. In short, the moment a trust organization raises the price 
of a product enjoying any degree of protective duty, it should 
thenceforth he put upon the free list and become subject at once to 
world competition. If the organizers of trusts in any line have not 
economic sense and public spirit enough to refrain from using their 
concentrated power to tax the public by increasing prices, the pub- 
lic should at once withdraw any protective advantage it has given 
to that industry. The primary object of protection is to make it 
possible to stimulate the development of domestic industries; but 
when industries have become established and proceed to take advan- 
tage of this protection for monopolistic, price-raising purposes, 
they should at once be thrown on their ovm competitive resources. 
This would be in harmony with strictly economic policy, and might 
have a wholesome effect upon the movement of trust reorganization" 

We endorse most heartily all that is said in the article 
that has been quoted, in so far as it lays down the proper 
tariff policy to pursue with reference to trusts; but it is 
only fair to say that two months later, in another article in 
his magazine, Gunton stated that, after subsequent in- 
vestigation, he had become satisfied that the facts relating 
to the tin-plate trust had been largely misrepresented and, 
after carefully considering, in this second article, the rise 
in the price of tin-plate and also the increase in wages 
during the same period and the advance in the prices in the 
raw materials entering into tin-plate, he came to this con- 
clusion: 



252 The Trusts 

" Strictly speaking, then, the rise in wages and raw material in 
the manufacture of tin-plate has been slightly more, or at least 
fully equal to, the increase in the price since the trust was or- 
ganized. The increased economies of the trust probably amount to 
more than this. They have probably converted what was a loss to 
some, no profit to many, and a small profit to only a few into a 
more liberal profit for all, and it may fairly be expected that the 
trust will share this undivided profit with the community before 
long in a further reduction of prices. We are glad, however, to be 
able to believe that whatever increased profit the trust is now mak- 
ing it is not getting it out of the rise of price. 

" It is worth noting in this connection ihat the price of tin-plate, 
with the increase of 11 per cent in wages, is still (May, 1899) $1.10 
a box less than it was when we relied on foreign supply for all our 
tin-plate under free importation. What has really been accom- 
plished is this: the tin-plate industry has been transferred to this 
country; whatever profits there are, now go to American invest- 
ors; the wages expended in that industry are distributed to 
American laborers; these wages have been increased since the trust 
was organized 11 per cent; the producers are undoubtedly making 
a good profit, and still the product is sold to American consumers 
at $1.10 a box, or 22 per cent less than before the tariff was 
adopted and the trust organized." 

If upon investigation (and certainly the rise of the price 
of tin-plate demands investigation), it should be found 
that the price of tin-plate has been unduly raised; if, as 
has been asserted by some, the tin-plate trust, through 
subsidiary companies, controls the manufacture of the raw 
materials that enter into it, and the increase in the prices 
of those materials is only an indirect way of concealing 
the inordinate profits of the trust itself, then the tariff on 
tin-plate should be removed at once. There is, and there 
can be, no question about this. Republicans will vote 
" aye " on such a proposition as readily as Democrats. Bui, 
iho>e who are truly anxious to remedy those evils of 
1 rusts, namely, the lack of competition and the 
imposition of high prices, rather than to procure 



Whose Fault is it ? 253 

the adoption by the people of their theories as to 
free trade, should never forget that the tariff on tin-plate 
caused the establishment in the United States between the 
time of the passage of the MeKinley bill in 1891, and 1898, 
of forty tin-plate plants, in which there were two hundred 
and eighty tin-plate mills, and that the price of foreign 
tin-plate when it was on the free list just prior to the 
passage of the MeKinley bill in 1891, was $5.10 per box, 
while the highest price that has ever been charged by the 
American trust has been $4.80 per box. Moreover, when 
it is said that the combination prevents the establishment 
of new tin-plate mills, let it not be forgotten that the 
trust, if it is a monopoly, has acquired it by other means 
than the tariff. Let us quote Byron W. Holt, of the Xew 
England Free Trade League, who cites the tin-plate trust 
as the typical trust that is fostered by the tariff: 

" To make certain that they would be able to put and hold prices 
up to the Dingley duty limit, they clinched their trust, it is said, 
by making a -five-year contract with the producers of tin-plate mills, 
which practically prevents others from starting in business during 
this period. They also, through their relations with the chief steel- 
bar producing companies, obtained such control of this principal 
raw material that even if an outsider could obtain a mill he would 
still be unable to produce tin plates for lack of raw materials." 

It would thus appear that something besides the tariff 
is to blame even in this case. But we have no hesitation 
in saying that whatever may have been the means employed, 
if the tin-plate trust has a monopoly, and if it is holding 
prices up above the fair profit mark, the monopoly should 
be killed. If domestic competition has been in any way 
strangled and cannot be revived, then, foreign competition 
should be courted in this particular enterprise. 

While foreign competition may be a means for killing 
an American monopoly, is it sure to kill trusts? If the 



254 The Trusts 

protective tariff were removed and we initiated the policy 
of free trade, would trusts be dissolved? Would the vari- 
ous business enterprises which now form them, return to 
the old methods of individual production and distribution, 
to unrestricted competition and to price-cutting among 
themselves? Would not the result be as follows? In so 
far as American industries, by reason of the higher wages 
of American labor, or the newness of their enterprise, were 
unable to produce as cheaply as their foreign competitors, 
would not the incentive to the establishment in this coun- 
try of new competitive enterprises be removed? Would 
not all the existing establishments in those industries, 
finding under free trade a keener competition, be more 
than ever compelled to combine and consolidate and form 
trusts in order to save themselves, if possible, from ruin? 
Would domestic competition be left in those industries in 
which foreigners could, in fact, produce more cheaply? 
Would there remain the possibility of any domestic com- 
petition in these industries? There certainly would not. 
What would be the effect of the foreign competition? The 
heads of the existing domestic enterprises, which would 
necessarily be amalgamated into an American trust, would 
make a fight for life, a struggle to keep afloat, and rather 
than go into bankruptcy they would adopt every resource 
that would enable them to escape the ruin. Two ways of 
meeting the foreign competition would at once suggest 
themselves, and would be immediately adopted, — the re- 
duction of wages and the reduction of the price paid for 
raw materials. On the part of the employers and pro- 
ducers there would be absolute inability to pay high wages 
and high prices for raw materials, and on the part of the 
wage-earner and the farmer there would be no means of 
obtaining high wages and high prices. It would be low 
wages or no work; it would be low prices for raw materials 



Whose Fault is it? 255 

or no market. Wage-earners could not look for other 
employers in those industries, because free trade with na- 
tions that were cheaper producers would be an obstacle to 
the establishment of new enterprises in that industry. The 
American farmer would then find that he had but one 
buyer, — one buyer now and no prospects of more buyers 
in the future, — one buyer, and even he could be a buyer 
only so long as he could buy most cheaply. On the other 
hand, if a tariff were maintained which recognized the dif- 
ference between the cost of production under American 
conditions of labor and under foreign conditions, there 
would always be, not only the possibility, but the probabil- 
ity and the ultimate certainty of the establishment of new 
factories and new mills in those various industries. The 
very possibility, even if it never developed into the actual- 
ity, would always tend to raise wages and to keep up the 
prices of raw materials, while, furthermore, the manufac- 
turer being sure of the great and valuable American home 
market, could dispose of at least a part of his product at a 
profit which would enable him to recoup the amount paid 
in high wages and good prices for raw materials The 
protective tariff can never be abolished to the advantage 
of the American people until American labor has become 
as cheap in productive power as that of the degraded labor 
of Europe. We are willing to concede that the difference 
in the cost of labor is by no means clearly shown by the 
difference in wages. The greater productive power of the 
American laborer may make him much cheaper at two dol- 
lars per day than the Englishman at four shillings ($1.00), 
or the Jap at the equivalent of fifty cents; but we are sat- 
isfied that notwithstanding American manufacturers em- 
ploying American labor and using American machinery, 
can overcome much of the advantage which the emplover 
of foreign labor has, yet the standard of living of the Ameri- 



256 The Trusts 

can workingman is and must be kept so much higher than 
that of the cheaper labor of Europe and the degraded labor 
of the Orient, that the American labor is more expensive, 
and that a protective tariff is essential to the maintenance 
of the standard of civilization which the masses of this 
country to-day enjoy, and which, pray God, they may never 
lower. 

Let us further consider the effect of free trade on 
trusts. When we have abolished the protective tariff for the 
purpose of killing trusts, have we succeeded? Very likely 
we have prevented the creation of new establishments in 
these industries in the United States, and without doubt 
the existing ones have combined together to save them- 
selves from extermination. Possibly, they will be crushed 
out by foreign competition; if so, the American trust is 
crushed, but American industry also is crushed. More 
likely, as has been intimated, in the desperate struggle for 
life, wages and the price of raw materials will be reduced 
to the level paid in foreign countries. But there is one 
other possibility or probability, and that is international 
trusts. We already have them in many industries, and 
when competition becomes so fierce that American in- 
dustry enters upon its death struggle, we will undoubtedly 
have more of them. What would be the effect of inter- 
national trusts upon American industry? Whenever such 
trusts were formed they would locate their machinery and 
capital where they could produce most cheaply. All their 
capital and moving machinery would be removed to the 
country where there could be the cheapest production. 
Usually that would be the country where labor is most 
poorly paid. It would hardly be America. The standard 
of living is too high here to permit of extremely low 
wages. American labor is more intelligent and inventive 
and productive than that of other countries; but, though 



Whose Fault is it? 257 

machines are invented largely by Americans, their use 
can be taught to the cheap laborers of Europe, and the 
still cheaper laborers of Japan and the other countries of 
the Orient. The capital to furnish the machines will go 
where it can find the labor that is cheapest per amount of 
product, unless, by moving, it is barred out of a valuable 
market. It is the easiest thing in the world to take the 
capital abroad; it is very easy to move the machinery; it 
is difficult to move the laborers, especially from a place 
where there prevails a high standard of civilization to one 
where they must accept a lower standard. To secure the 
American market to the American manufacturer, it is still 
necessary as to very many products, to impose a tariff. 
Abolish it, have free trade, and if you have international 
trusts (it is to be remembered there are already some, — 
and increased competition with foreign countries because 
of free trade means more), many American industries will 
be closed and hundreds of thousands of laborers will be 
thrown out of employment. The cheapest seller will com- 
mand the market, unless barred out by a tariff or embargo. 
The American market is the best in the world. But with- 
out a tariff the Japanese are more likely to possess the 
American market than the Americans. 

In considering the effect of the tariff on trusts, it is 
to be noted that free trade countries, too, have their trusts, 
and, further, that the greatest of all American trusts, the 
Standard Oil Company, is not aided by the tariff. 

To abolish the tariff upon any article, then, merely be- 
cause it is largely produced by a trust would be an act 
of folly. To abolish the tariff, because a trust has been 
formed, might in time result in destroying the domestic 
trust, for even if the prices charged by this trust were not in 
excess of a fair profit but were greater than the prices of for- 
eign goods, — as they would undoubtedly be, — the industry 



258 The Trusts 

itself would ultimately be destroyed by the abolition of the 
tariff. But to abolish the tariff on any article at any time 
when the American producers of it are charging a price be- 
yond the fair profit mark after paying American wages, 
whether those producers be combined or incorporated as a 
trust or working separately, is right and proper and neces- 
sary. It would be a potent remedy against extortionate 
prices. Furthermore, it would be consistent with the 
theory of protection, which is that a tariff upon importa- 
tions of foreign products will foster domestic production, 
encourage the establishment of a number of factories which 
will compete with each other, and which will gradually 
perfect their machinery and methods, until not unlikely 
they will be able to produce as cheaply as their foreign 
competitors. The tariff never was intended — so far as its 
protective features are concerned — to be more than equal 
to the difference between the cost of production in foreign 
countries and the cost of production in the United States. 
It was intended only to give to home manufacturers an 
opportunity to meet the competition of foreign manufac- 
turers. 

A fact pregnant with significance concerning the tariff 
and our industries, is the remarkable growth of our ex- 
ports of manufactured goods in recent years. During the 
ten months ending with April, 1899, the United States ex- 
ported about two hundred and seventy-six million dollars' 
worth of manufactured goods, eighteen per cent more than 
in the corresponding ten months of 1897 and 1898. This 
amount considerably exceeded the amount of our imports 
of manufactured goods and it covered a wide range of 
products. It must be conceded, we believe, either that 
we can produce those products more cheaply than our 
foreign competitors, or else that this great amount of 
American products was sold to the foreigners at a less rate 



Whose Fault is it ? 259 

than was charged to Americans. No duty on these prod- 
ucts would appear to be necessary for protective purposes; 
and it is equally difficult to see how any revenue could be 
derived from articles which we could sell so cheaply that 
we export them instead of import them. 

If American exports of manufactured articles for the 
year ending June 1, 1900, aggregate $430,000,000, as has 
been estimated, then there must be many articles which 
we can manufacture cheaper than foreigners, and to re- 
tain a tariff upon them is to expose Americans to extor- 
tion. If such products are sold in foreign countries below 
cost, Americans pay the amount of the loss. As the cost 
of production decreases, the rate of tariff should be lessened 
accordingly. If it is not, a trust may be formed and the 
price, for a time at least, kept up almost to the point which 
will represent the cost at which the goods produced in the 
foreign country can be laid down on our shores. Trusts 
have undoubtedly been formed to obtain high tariffs and 
to combine local competitors for the purpose of exacting 
as high a price as can be asked with foreign competitors 
barred out. The tariff probably does assist some trusts 
which desire to maintain high prices and to monopolize 
a certain product. The tariff when so used should be 
abolished. It is, however, the extortionate price that calls 
for such action, not the mere fact of industrial combina- 
tion. When free trade is proposed as a general panacea for 
trust evils, to be applied to products which can not be pro- 
duced as cheaply in this country as in foreign countries, 
we should not hesitate to refuse to adopt the scheme. Free 
trade is more likely to produce panic than to be a panacea. 



CHAPTEE XIII. 
TRUSTS AND EXPANSION. 

It is a fact noted by historians of political events that 
whenever a great crisis in human affairs has occurred, there 
has sprung up a great master of men. Every great epochal 
movement in the world's history has brought forth its 
leader, — the man with peculiar qualifications for the solu- 
tion of the new problems and the discharge of the new 
duties. The annals of America are replete with instances. 
In the trying times of the Bevolution, when patience and 
firmness and self-restraint were so requisite/ there wag 
found one man who possessed these qualities in a pre-emi- 
nent degree; Washington was born of the times, God-given 
and God-directed. Later when the country went through 
the greater strife of the Bebellion, when the perpetuity of 
the Union was at stake, the needs of the hour found in 
Lincoln the onty man possessing the forbearance, the en- 
durance, the charity, and the utter lack of malice which 
alone could hold together the North with all its varying 
views. Industrial history is quite as full of instances of 
a Providential care for the wants of mankind as is politi- 
cal history. Whenever human needs have required some 
new product, whenever the visible supply of old products 
has become completely exhausted or so diminished as to be 
unable to supply the demand, either new quantities of these 
products have been unexpectedly discovered, or a substi- 
tute has been found in abundance. When the whaling 

260 



Trusts and Expansion 261 

industry had passed into decline and the supply of sperm 
oil for purposes of illumination was rapidly becoming ex- 
hausted, kerosene in almost superabundance was discov- 
ered. When our country was being denuded of its forests, 
and the use of wood as fuel had become almost impossible, 
great beds of anthracite coal were discovered. When the 
invention of the steam engine revolutionized the industrial 
world and unfolded vast possibilities in the manufacture 
of all the commodities that make our modern civilized 
life what it is, there at once arose the necessity for an 
enormous supply of soft coal; and, forthwith, beds of soft 
coal of vast extent were discovered, amply sufficient to 
supply the demand. When electricity began to be ap- 
plied in a multitude of industries, a great need was felt 
for copper; and unknown copper mines of great productiv- 
ity were discovered. We attribute these provisions for 
all our new wants, as they spring up, to an over-ruling 
Providence, to destiny, or to that talent of invention and 
discovery which is the child of necessity, according as we 
consider the matter from a religious, a historic, or a scien- 
tific standpoint. This same Providential care for human 
needs is seen not alone in the birth of leaders for great 
crises and in the supplying of products necessitated by 
new inventions that have given birth to increased desires, 
but also in the broader field of political development and 
commercial extension. Commercial freedom began in Eng- 
land in the fourteenth and fifteenth centuries. Prior to 
that time the sole important industry of the country was 
agriculture, limited and fettered by the feudal system. 
In the latter part of the fifteenth century, when commer- 
cial life, fostered by the new commercial freedom, began 
to manifest itself, a new world was discovered furnishing 
a field for the exercise of commercial activity. 

The most striking fact in the financial history of the 



262 The Trusts 

day is the growing surplus of capital. One of the great 
problems which confront people is where to find fields for 
the profitable employment of saved-up wealth. For at 
least a quarter of a century there has been a diminishing 
return from investments; and the prices of first-class securi- 
ties have been constantly increasing. The matter is of 
moment not only to the great capitalist, who, perhaps, 
can be left to take care of himself, but also to the widow 
and orphan dependent upon the savings of the deceased 
husband and father; and it is of equal interest to the wage- 
earner, who works and toils in youth and early manhood in 
the hope of laying up something for the inevitable rainy 
day and for the time of old age and decrepitude. 

The most striking fact in the industrial history of the 
day, — a fact which is, indeed, but another phase of the 
fact of a surplus of capital which has been observed in the 
financial world, — is that the productive pow T ers of the 
civilized nations are now far in excess of their own powers 
of consumption. New inventions and improved methods 
in industry have made the material advance of the last one 
hundred years conspicuous among all the centuries. At 
the close of this century we find that with their machines 
and their perfected business organizations, the industrial 
nations of the world possess a power of production which 
is much greater than the effective demand. It is only 
lately that this has become true of the United States. Un- 
til recently we have been a borrowing nation, and a nation 
of importers of manufactured articles. But American re- 
sources developed by American enterprise, managed with 
American thrift, have placed us in a position where, within 
a year, we have loaned $25,000,000 to Russia, and are 
rapidly becoming a creditor nation. American ingenuity and 
inventive talent have brought it about that, notwithstand- 
ing that we are the greatest of agricultural nations, and 



Trusts and Expansion 263 

notwithstanding that we eat and drink and wear and con- 
sume more per capita than any other nation of the world, 
and notwithstanding that our home market of eighty mil- 
lions of purchasers is the richest in the world, and notwith- 
standing that our manufacturing industries are even now 
only in their infancy, these industries are capable of sup- 
plying the demands of at least one hundred and sixty mil- 
lions of people. We can manufacture twice as much as we 
can consume, or to put it in a light which will show the 
danger of the situation, half of our factories and mills can 
supply all that we can consume, while the other half re- 
main idle; half of those employed in manufacturing can 
make all that we need, while the other half remain unem- 
ployed. The evil consequences of over-production have 
been alternate periods of feverish activity and stagnant 
depression; first, employment over time; next, a shut- 
down. Business has been irregular and spasmodic; com- 
petition has followed, — keen, intense, bitter, destructive, 
and finally self-destructive. There is but one alternative 
for us: either lessened production, diminished employment 
and lower wages, ruin, and bankruptcy, or else new markets 
and larger outlets for our surplus products. 

The formation of trusts is one of the means adopted to 
remedy these evils. Expansion of territory, extension of 
commerce, is the other remedy, — a remedy supplemental 
and, possibly, alternative. Either our whole industrial sys- 
tem is likely to be revolutionized at once, or else the evil 
day must be put off by the civilized manufacturing nations 
of the world turning their surplus capital into new fields 
and using it in the development of the decadent and un- 
developed countries of the Orient and the tropics. The 
problem of over-production, — the problem of trusts, — is 
momentous. It cannot be solved in an instant. We need 
time for study, for observation, for consideration, and for 



264 The Trusts 

experimentation, but all the time while we are studying, 
observing, considering, and experimenting, relief, — tem- 
porary relief, at least, — from the evils of over-production 
may be had by the development of foreign markets. The 
evils which trusts are formed to correct may in this way he 
obviated; at any rate we can be relieved of the immediate 
stress. 

The United States until within a few years has done 
nothing to exploit foreign countries. It has developed 
the amazing resources of its own country. Those resources 
are not exhausted, but they have been very generally ap- 
propriated and developed. For some time the TJ. S. Com- 
missioner of Public Lands has been reporting that the 
vacant lands of the government consisted principally of 
timbered or arid lands, and that there was little public land 
suitable for cultivation without clearing or irrigation. 

The great American people who, ever since their na- 
tional history began, have been steadily and constantly 
advancing until they have expanded from the narrow strip 
along the Atlantic southward to Mexico, and westward to 
the Pacific, and northward to Alaska and the Arctic, have 
now reached the point where, notwithstanding the lack 
of the complete development of their resources, there re- 
main few resources that are wholly undeveloped. Eco- 
nomic problems in America, since the formation of the 
Republic, have largely worked out their Qwn solution. Mil- 
lions of immigrants have come into the country, but the 
constant pressure upon the East has been relieved by the 
steady flow of emigration to the unoccupied and fertile 
lands of the West. The rapid growth of the country has 
stimulated manufacturing industry in the East and North 
until we have become one of the greatest industrial na- 
tions of the world. But the checking of our continental 
expansion by the occupation of all our best agricultural 



Trusts and Expansion 265 

land is sure to result in our experiencing new and great 
economic evils. Unless we expand in other directions, 
there is sure to be a diminution of the demand for labor. 
Not so many men can now go West and become farmers 
and producers; more of thorn must remain in the East to 
glut the labor market; and unless new markets are found 
for our surplus products, new factories can not be estab- 
lished, and many of the existing factories must suspend 
operation. 

The nations of Europe have for two generations been 
sending to America their surplus labor; but they have done 
more than that to give employment and to bring wealth to 
those who have remained. They have realized the fact 
that there must be enforced idleness of their workers, shut- 
downs of their factories and mills, unless they found new 
fields of activity. They have appreciated that those who 
work are those who create and who acquire wealth. In- 
equality and injustice in distribution may bring it about 
that not in every case does all this wealth pass to the in- 
dividual creating it, but of nations the statement is true 
without exception. The busiest nation is the wealthiest 
in proportion to population; but if a nation can produce 
any one article in larger quantity than it can consume, it 
must stop the production of it or supply some other coun- 
try with it. The European countries, especially in the last 
quarter of a century, have been pushing forward in a 
race with each other to acquire colonies or spheres of in- 
fluence, with which they could establish relations of com- 
mercial intimacy. Africa has been carved up. Germany, 
France, and Great Britain, each has its slice. The last 
named is sure to annex more closely the Transvaal and the 
Orange Free State. France is pushing her sway over the 
Soudan. She already has Algiers and Madagascar. Germany 
is not interfering in these schemes, but she is sure to de- 



>66 



The Trusts 



mand a quid pro quo. Italy is trying to obtain a foot- 
hold in Abyssinia. In Asia and Oceanica, too, the Euro- 
pean powers are colonizing. Great Britain, for over a cen- 
tury, has had the fertile and populous peninsula of Hin- 
doostan, and has gradually extended her conquests and 
acquisitions. A large part of China has been mapped out 
into spheres of influence by Eussia, Italy, France, and Ger- 
many, and though the Mongol empire retains nominal 
sovereignty, real proprietorship over these spheres seems 
to be in the several European nations. Eussia has de- 
veloped her vast Siberian territory, has acquired an 
almost dominant influence in northern China, has 
virtually appropriated some of its best ports and a large 
portion of its territory. Japan has taken Formosa and 
would have seized much of China or Korea, had not Eussia 
intervened. England's colonial possessions are very many 
times larger than the mother country. By all the Euro- 
pean nations an attempt has been made to find new 
markets and new fields of enterprise, more work for the 
toiler, more sales for the merchant. 

One of the recent consular reports gives some idea of the 
extent of the colonial possessions of European states. It 
shows that Great Britain, outside of the United Kingdom 
itself, possesses 16,662,073 square miles of territory, hav- 
ing a population of 322,000,000; France, outside of the 
mother country, 2,505,000 miles, with a population of 
nearly 50,000,000; Germany, 1,615,500 miles, with a popu- 
lation of 7,450,000; Holland, 783,000 miles, with a popu- 
lation of 34,210,000; Portugal, 809,900 miles, with a 
population of 10,200,000. What these nations are doing 
in the way of the development of their colonies may be 
inferred from their railway projects. Eussia is building 
a Trans-Siberian railway almost five thousand miles in 
length and bringing the Czar's empire into close touch 



Trusts and Expansion 267 

with Japan and China. A branch of the South Siberian 
railroad has been extended to the border of Afghanistan, 
opening up to Eussia the riches of Persia and giving her 
a path towards India. France is about to build a railway- 
across the Sahara Desert from Algiers and Tunis to Tim- 
buctoo and the Soudan. Cecil Ehodes' dream of a railway 
from Cairo to the Cape of Good Hope is a project that will 
hardly be long deferred after the termination of the war 
with the South African republics. 

The United States has reached a position where it is 
obliged to participate in the struggle for foreign markets, 
and to find new channels into which to turn its surplus 
capital. These are our great economic needs to-day. Will 
Providence, or destiny, or human ingenuity — whatever you 
wish to call it — show us the way in this time of need? It 
would seem, indeed, as if an over-ruling Providence had, 
within two years, pointed out to us the way of supplying 
to ourselves the means. American policy, American tradi- 
tion, and American interests for almost a century and a 
quarter have kept us from acquiring territory beyond the 
continent; but at the close of the nineteenth century, 
when our interests demanded a wider sphere of activity 
and enlarged markets, although this tradition and old-time 
policy hold us back and the timid and hesitating endeavor 
to restrain the movement of expansion that has never 
stopped since the time when the thirteen original colonies 
formed themselves into a nation — at this time, that over- 
ruling Providence, that evolution, that destiny which is 
always apparent in the affairs of men, manifests itself, and' 
the need is met. The blowing up of the battleship Maine 
in Havana harbor, and the prolongation of a cruel and 
merciless war of extermination against a weak people at 
the very threshold of our country, involved us in a contest 
with Spain, the result of which was that without premedi- 



268 The Trusts 

tation or design, unexpectedly, if not reluctantly, rich, 
fertile, and populous islands in the Orient came into our 
possession and control. The path of duty, the path of 
destiny, has been suddenly opened for us in the East. For 
our over-production and our surplus capital we have sud- 
denly found a relief, even though, perhaps, temporary. 
We want constant work for our toilers, not half time; fair 
prices for our products, not sacrifice sales; we produce more 
than we can consume; we need markets; suddenly oppor- 
tunities are given us to acquire markets, and on terms as 
favorable as those offered to any nation in the world. True, 
we could always sell our goods wherever men were willing 
to buy, but trade, to a great extent, follows the flag. It is 
largely influenced by political connections; it is frequently 
barred or hindered by arbitrary laws enacted in defiance of 
economic laws. 

We could never have persuaded ourselves to attempt to 
take possession either of the Philippines or of Porto Eico, 
had they not come into our power as the result of a war 
which never would have been waged had not humanity 
sounded the tocsin. But now, when those islands have 
come into our power, when their pacification and their 
government, for a time at least, fall as duties upon us, 
when we see that perforce and involuntarily we have be- 
come implanted in them, traditions and old-time policies 
are questioned and quizzed in the light of the facts of to- 
day. Just what we shall do with these new island posses- 
sions, just what form of government they shall have, to 
what extent they shall have complete self-government or 
participate in federal legislation with and over us, are ques- 
tions not yet settled. But the American people, as self- 
confident, as self-reliant, as courageous, and as tenacious as 
ever, demand the retention and pacification of the islands 
that have become theirs. That, at least, is the policy of 



Trusts and Expansion 269 

the Kepublican party. He who would give them up would 
be guilty of a desertion more base than that of the heart- 
less mother who leaves her child on some one else's door- 
step. The Democracy would leave the Philippines to an- 
archy. The Eepublicans would pacify them and develop 
their resources. 

The Philippines are themselves a vent for the industrial 
pressure that trusts are designed to shut off. They have 
ten millions of inhabitants. Although their wants are 
now of the simplest kind, they will increase with civiliza- 
tion. Their tropical fruits, their grasses, their other pro- 
ducts, find a natural market here. On the other hand, as 
they advance in civilization they will furnish a great 
market for our manufactured articles, especially cotton 
goods. 

We of the United States need the Philippines and Porto 
Eico, not only as markets for our surplus products, but as 
fields for the employment of our saved-up capital. We 
need the former, not only because of their intrinsic worth 
to us, but because they are the key by which we can unlock 
the door to China's markets. 

The commercial value of the Philippines to America has 
been carefully estimated by Hon. John Barrett, former 
United States minister to Siam, who, during his leaves of 
absence from his post, has traveled over nearly all the 
countries of the Orient, and has made a careful study of 
commercial conditions and possibilities. His opinion is 
that of one of exceptional information, and the greatest 
weight and consideration should be given to the following 
statement in an article by him on the Philippine situation, 
published in The Review of Reviews for July, 1899: 

" Judging from comparative data after looking at what hap been 
done by the Dutch in Java, by the British in Burmah and in the 
Malay Peninsula, and even by the French in Indo-China, the 



270 The Trusts 

United States should develop a foreign trade in the Philippine 
Islands within the next fifteen years of over $100,000,000." 

That the benefits of the development of trade with the 
Orient will be in no sense sectional; that they will not only 
furnish a relief to our manufacturers who stand so much 
in need of new markets, but that they will benefit the 
American farmer and increase the market price of his 
products, is also the testimony of Mr. Barrett. We quote 
from an article, in The North American Review of August, 
1899, written by him: 

" The Far East, particularly China, affords markets which should 
arouse the interest of all sections of the United States, and make 
the country stand unanimously for a firm foreign policy. The 
West and East and the North and South are equally concerned in 
maintaining the freedom of trade and preserving our treaty rights 
throughout China. Were it merely a sectional issue, there might 
be a grave question as to the advisability of taking a strong posi- 
tion as to the future of the empire. China and other Asiatic 
countries want all the flour and timber, and a goodly portion of 
other kinds of food and raw products, which California, Oregon, 
Washington and neighboring Western States can supply; they 
want the manufactured cotton and raw cotton of the South in in- 
creasing quantities, and the time may come when this Pacific- 
Asiatic demand will take up the surplus supply of the South's 
great staple; they want the manufactured cotton, iron, steel and 
miscellaneous products of the North and East, together with un- 
limited quantities of petroleum; they want corresponding manu- 
factured products of the central West, and there is no reason why 
there should not be developed among the Asiatic? millions a demand 
for the central West's great staple, maize (or Indian meal), such as 
has been created for flour. I draw no fancy picture, but simply 
express my honest opinion after five years' careful study of the 
field which I am discussing. 

" The question of protecting such market appeals to capitalist 
and laboring man alike. It offers the former an opportunity for the 
investment of his capital, and it increases the employment and 
wages of the latter by providing a greater demand. . . . The 
farmers of the West and South can unite with the laboring men 



Trusts and Expansion 271 

of the North and East in supporting the shippers, manufacturers 
and exporters in developing a strong Asiatic policy. Were the door 
of China closed against us to-morrow, it would mean that labor and 
capital alike would suffer immeasurable harm. They should, there- 
fore, see that it is never closed. 

"... If the great northern provinces of China now require 
$7,000,000 worth of our cottons, there is no valid reason why they 
should not in ten years from now consume $20,000,000 worth. A 
few years ago, $3,000,000 represented the value of the trade. When 
we consider that the cotton mills of New England and the South 
are supplying this demand in Manchuria, and that they have even 
been kept running when other mills have been closed, there is every 
reason why those two sections should join together in insisting 
that the open door shall always apply to Manchuria. 

"American exports to the Far East to-day approximate $40,- 
000,000, if the actual value of everything which leaves our shores 
is counted; but, basing our estimates on reasonable grounds, there 
is no reason why they should not expand in the near future to 
$150,000,000, and our total exchange reach $300,000,000. Few peo- 
ple appreciate the enormous business that is now done up and down 
the Pacific Asiatic coast. It amounts to $1,000,000,000, gold, per 
annum, and represents 500,000,000 people. Of this, the imports are 
over half. Certainly it is logical to hold that the United States 
should be able to supply at least a third of the products now im- 
ported from foreign lands. China's trade amounts to $250,000,000, 
with a population of 350,000,000 people. If her wants ever expand 
in any such degree as those of Japan and other countries which have 
awakened from their Asiatic lethargy, her foreign trade should 
reach, on a conservative estimate, $500,000,000. Were the same 
ratio of population to trade, or one to two, which exists in all other 
countries of Asia, progressive and retrogressive, applied to China, 
her future foreign exchange could be estimated at $700,000,000." 

Similar testimony is that given by Mr. James S. Fearon 
in an article in The Forum for January, 1900: 

"There has been no more remarkable expansion of any depart- 
ment of our commerce than has taken place, of late years, in our 
exports of cotton cloth to China. . . . And yet, it is perfectly true, 
as the members of the Lyons Commercial Commission concluded 
after a tour through the interior of the country, that ' foreign trade 
has merely scratched the surface of the possibilities of China. The 



272 The Trusts 

great majority of the Chinese are familiar neither with foreigners 
nor foreign products.' " 

In an earlier chapter on the Trusts and the Farmer, we 
have shown the estimates of J. C. Hanley, of the National 
Farmers^ Alliance of America, as to the immense value, in 
dollars and cents, of the demand of the Orient for wheat 
and cotton; and his conclusion that this demand would 
increase the market price of American wheat at least fif- 
teen or twenty cents per bushel. 

It will be argued by the opponents of expansion that 
annexation or political connection is in no sense necessary 
to the acquirement of a foreign market. It will be said 
that the trade follows the price and does not follow the 
flag. Whether or not this is true, it is certain that the 
flag is necessary to protect the trade, and the history of 
colonization shows that the benefit of the larger market 
usually falls to that country whose capital is employed in 
the development of the market, especially if it is that coun- 
try which, by reason of the exercise of political control, 
maintains the order and government which alone is the 
guarantee of the security of the investment. This subject 
has been carefully considered by Mr. 0. P. Austin, chief of 
the United States Bureau of Statistics, and he has collated 
these significant facts. In the year 1897, Great Britain 
supplied forty-one per cent of the products imported by 
her. colonies, but she was able to supply only fourteen per 
cent of the importations of countries having no political 
connection with her. Even to the United States, a coun- 
try with which she has direct means of communica- 
tion, and the people of which speak the same lan- 
guage and have many interests in common with 
her citizens, she supplied* less than twenty-two 
per cent. France supplied her colonies with sixty-two 
per cent of their imports, but she supplied only 9.33 per 



Trusts and Expansion 273 

cent of the imports of other countries. It is to be borne 
in mind, furthermore, that in the case of Great Britain 
there were, at the time mentioned, no discriminations in 
the tariff laws of her colonies in favor of the products of 
the mother country as against countries that were the com- 
petitors of Great Britain. Great Britain, in the year 1897, 
found in her colonies a market for nearly $400,000,000 
worth of goods, all of a kind for which the producers and 
manufacturers of the United States are earnestly seeking a 
market. Her exports to her colonies were forty per cent 
greater in the year 1897 than were the total exports of 
manufactured products to the entire world from the United 
States in that year. Great Britain's exports to her col- 
onies constitute over a third (34.4 per cent) of her entire 
exports. But commerce has another side than exporta- 
tion. There can be no commerce without exchange; no 
exports unless there are some imports. In 1897 Great 
Britain took fifty-seven per cent of the exports from her 
own colonies, while from countries not a part of the Brit- 
ish world she took but twenty-one per cent of their exports. 
Our own experience in the case of the Hawaiian Islands 
amply proves how political connection stimulates trade. 
The following article, clipped from The Auburn (N. Y.) 
Daily Advertiser of June 9, 1900, shows, at once, the 
increase of our trade with these islands of the Pacific lately 
annexed by us; also the meagreness of our trade with coun- 
tries of much larger population with whom we have no 
political connection: 

" Senator Lodge called attention to the fact that the trade be- 
tween the United States and the Hawaiian Islands has increased 
from $11,500,000 in 1895 to $33,300,000 in 1899, and cites it as an 
illustration of w T hat may happen with Porto Rico and the Philip- 
pines. ' These colonies,' he says, ' will absorb much of our surplus 
manufactures and agricultural products, for they must draw their 
flour and their provisions and most of their manufactured merchan- 



274 The Trusts 

dise from this country. Our trade last year with the Hawaiian Isl- 
ands/ he says, * was greater than with the whole of the Australasian 
colonies with their 5,000,000 of people. It exceeds by more than 
$3,000,000 our trade with the entire continent of Africa; it is 150 
per cent greater than our trade with all the Central American 
states; it is equal to 30 per cent of our trade with the whole of 
Canada; 50 per cent greater than our trade with all the British 
West Indies; half as large as our trade with Brazil; 500 per cent 
greater than our trade with Venezuela, and comes within $6,000,000 
of being as large as our trade with the entire empire of China.' " 

It should not be forgotten, in considering this matter of 
imports from colonies, especially when those colonies 
are tropical or Oriental, that the development of their re- 
sources is largely by means of the capital of the home 
country, and the prosperity of the colonies is shared in by 
those who invest their money in them. British statisti- 
cians have estimated that at least $2,000,000,000 of English 
capital have been invested in her colonies. If so, they 
have furnished an outlet for the use of the surplus capital 
of the United Kingdom and the profits on the export trade 
of the colonies go to swell the wealth of the citizens of 
the home country as well as to give prosperity to the in- 
habitants of the colonies themselves. The limits and the 
purposes of this article do not permit any consideration 
of the great benefits to the colonies themselves by the 
development of their resources by means of the capital of 
the colonizing country. We have been considering colon- 
ization and expansion only in so far as they affect the ques- 
tion of trusts. 

Let us summarize. Territorial expansion seems to 
aid in the acquirement of foreign markets. Foreign 
markets are absolutely necessary to America and to all the 
industrial nations of the world. Without those markets 
the people of these countries are the victims of over-pro- 
duction. Unless they acquire new outlets of trade, they 



Trusts and Expansion 275 

must diminish production, lessen the employment of labor, 
lower wages, and suffer all the evils and hardships and 
miseries of industrial depression. Trusts have been formed 
for the purpose of correcting these evils. Expansion is the 
only alternative or supplemental remedy. Expansion may, 
however, not only correct the evils which trusts are de- 
signed to correct, but it may open up to us such commer- 
cial possibilities that in turn, the trusts will have to be 
continued, not for the purpose of regulating and restrict- 
ing production, but as the most perfect organization for 
the seizure of the great opportunities of trade. The trust 
that restricts production and the trust that reduces the 
number and the wages of the employed is a necessary evil 
resulting from destructive competition, so long as we do 
not find markets for our surplus products- in those coun- 
tries which have not yet attained their industrial develop- 
ment. He, then, who would relieve the present evils of 
over-production in the United States should favor that 
policy which tends most surely to give us the foreign mar- 
ket. He who would abolish the trust, in so far as it 
attempts to restrict production and to lessen the oppor- 
tunities for work, he who would abolish the trust as an 
evil agency, should sustain those in charge of the affairs 
of the state who are endeavoring to give to the American 
worker the opportunity to supply the increasing wants of 
those to whom American civilization may be borne. 

But when this is done it will be found that those trusts 
which are only great industrial organizations of enormous 
capital and power, the trusts which are the cheapest and 
most efficient means of production and distribution, will be 
necessary to the development of the trade in the newly ac- 
quired market. Enormous capital is essential, and only 
the well-organized trust will possess the means and the 
facilities. We have alluded in earlier chapters to the great 



276 The Trusts 

foreign market worked up by the Standard Oil Company, 
which now brings $60,000,000 a year into this country; and 
to the enormous orders for rails for railways in Eussia and 
China which have been recently given to the great steel con- 
cerns of the country; also to the fact that eighty per cent of 
our exports of manufactured goods are said to be products 
of industrial organizations so great that we popularly call 
them trusts; also to the recognition by our German com- 
petitors of the fact that it is our large and perfect organiza- 
tions that are winning for us industrial supremacy. The 
rapidity of our strides may be judged from the following 
article, clipped from The Rochester (N. Y.) Democrat and 
Chronicle of June 1, 1900: 

OUR ENORMOUS EXPORT TRADE. 

" It is estimated that during the year which will end June 30th, 
this country has exported of the products of its factories to the 
value of about $430,000,000. Taking this record in connection with 
our agricultural exports, it shows an extraordinary degree of pros- 
perity, exceeding that ever enjoyed by any other nation. The 
total foreign commerce of the United States for the current year 
will amount to over $2,300,000,000. Of that it is estimated that 
$1,400,000,000 will represent our exports to other countries. That 
is an average of a little over $3,835,616 a day for the entire year. 
Uncle Sam, it will be seen, is winding up the century with the 
biggest department store trade on earth." 

The conclusion of the whole matter is this: The indus- 
trial salvation of the country — the only* escape from the 
evils of over-production which trusts are formed to cor- 
rect — the welfare and prosperity and hence the happiness 
of all classes 1 — is the acquirement of foreign markets; but 
in the development of those markets and in the exploitation 
of the newly acquired fields of enterprise, gigantic indus- 
trial organizations are the most efficient instruments. 



CHAPTER XIV. 

THE MAN AND THE DOLLAR. 

William J. Bkyan, in an address delivered at the Chi- 
cago Trust Conference in September, 1899, declared him- 
self as favoring an industrial policy which placed "the 
man before the dollar," and as bitterly opposed to any sys- 
tem which placed " the dollar before the man." 

Mr. Bryan's speech is worthy of great consideration, for 
it calls up one phase of the problem of trusts which is apt 
to be overlooked, namely, the social phase. Just what this 
eloquent orator meant by his epigrammatic expression — ■ 
which, indeed, he quoted as one of Lincoln's utterances — is 
not perfectly clear, but he probably meant to express his 
belief that the great combinations of capital, the industrial 
trusts of to-day, are organizations which enable a few 
people to earn or to acquire vast sums of money, while 
working the ruin of the masses. Mr. Bryan, for the pur- 
poses of argument, would concede that the trust is a means 
of cheap production; but he contends that the cheapness 
of the trust and its savings are the results of depressing the 
price of raw material, of discharging vast numbers of work- 
men, of closing hundreds of small establishments, of dis- 
pensing with thousands of middle-men, and of saving the 
losses that come from a liberal extension of credit. It is 
these hardships and sufferings, and nothing but these, 
which Mr. Bryan sees in trusts. With the strongest desire 
to do him perfect justice and with an equal yearning to 

277 



278 The Trusts 

throw not even the weight of one single individual's influ- 
ence in favor of any policy which can be of injury to the 
lowest or the poorest or the most humble, let us, however, 
present a few thoughts upon the subject of the effect of 
the aggregation of wealth upon the welfare of the toilers 
and wage-earners and those who are popularly called the 
middle classes and the masses. 

It may sound base and sordid and worldly to declare that 
the amount of a nation's wealth — the abundance of those 
commodities which have become the comforts and conveni- 
ences of modern life — is a fair measure of its progress; 
that the nation, and as a rule the individual, that is very 
poor, that is obliged to work incessantly to eke out an 
existence, is largely prevented from attaining the highest 
standard of human development. This statement is made 
with a full recognition of the vast numbers who, though 
poor in this world's goods, are rich in all the elements that 
constitute a true and noble character; and in full view of 
the fact that great wealth is often corroding and debasing, 
and that it by no means necessarily brings in its train, 
culture or education or refinement or character. Still, 
wealth is one of the hand-maids of civilization. It is 
wealth that makes leisure possible; and it is leisure, or at 
least that form of leisure, which gives us opportunity for 
study and travel and social intercourse and recreation, 
that fosters refinement and culture. The man who has 
to work all the time except the few brief hours when he 
sleeps and eats merely that he may gain strength and rest 
so as to work again, leads a sordid life. The highest type 
of man can never be evolved from one so oppressed until 
his earnings — his wealth — have given him more leisure. 
Edwin Markham's " Man With the Hoe " is the poet's pic- 
ture of man degraded to the level of the brute because of 
the lack of leisure and of opportunity to elevate himself 



The Man and the Dollar 279 

to his rightful position of " man created in the image of 
God/' of man whose place is but a little lower than the 
angels. 

We err very greatly, then, if w T e ignore the real value of 
wealth as a cultivating, refining, elevating, and uplifting 
force. The true policy of the statesman, who would assist 
the mass of men, is to enable them to obtain wealth. Lin- 
coln's aphorism, which Bryan quotes with approval, " place 
the man before the dollar," is not correctly interpreted if 
it inspires a course that prevents the honest acquirement 
of wealth or creates hostility among those who co-operate 
in its production. The highest statesmanship is to pro- 
cure the adoption of such policies as w T ill put the dollar in 
the hands of the man and let him use it for his ad- 
vancement and betterment. Place the man before the 
dollar, but put the man within reach of the dollar. 
Place the man above the dollar, but in the 
sense that the man may stand upon the dollar to 
rise higher in the world. The real_question, then, 
is, " Is the aggregation of wealth in great corporations a 
benefit or an injury to the masses? " We have shown how 
Mr. Bryan sees only evil in trusts, but there are very many 
men of great ability who cannot help feeling that his views 
are short-sighted; that he has not looked either back into 
the past, or far into the future; that he has not read aright 
the lessons of industrial history; that he has not clearly 
foreseen all the possible dangers of the industrial future. 

The limits of this book do not permit as thorough a con- 
sideration of this subject as might seem desirable, but in 
the chapters that have preceded, the matter has of neces- 
sity been incidentally touched upon. We can here do little 
more than to summarize some of the points already made. 
The significant fact of industrial history is that combina- 
tion of capital and concentration of effort have always 



280 The Trusts 

meant a more abundant production of wealth. Individu- 
alism, absolute individualism, is the lowest type of sav- 
agery. We can, with the utmost difficulty, conceive of a 
condition in which each person wholly supplies his own 
wants; but as we advance to what may be called industrial 
history, we observe that phenomenon which is known as 
the division of labor; that system of industry in which a 
man no longer attempts to make all the things which he 
needs, or even all of any one thing which he needs, but in 
which special talent and special aptitude manifest them- 
selves and train themselves in the making of a part of some 
thing, which it is found can be made more successfully by 
that person than by others. This has necessitated exchange 
among men and it has rendered possible the application of 
machinery, which in turn has been found to be able to pro- 
duce certain articles or parts of articles in even greater 
abundance. Just in so far as the division of labor and 
specialization proceed, co-operation, consolidation, and 
combination become necessary. The result is that wealth — 
the things that men need to eat and to drink and to wear 
and to consume, all become very abundant. Not only does 
production mightily increase, but there is a more general 
distribution. This is not only the fact of history, but this 
is the necessary result, from the nature of things; for the 
increased product can be disposed of only by cheapening it. 
The cheapening of the product is sure tb increase the de- 
mand; the demand for the product causes a demand for 
labor, and in proportion to the amount of work to be done 
the wages of the workers are increased. As long as there 
is competition, and the probability of competition, this 
must be the result. 

Mr. Bryan declares that he sees in industrial combina- 
tion, the discharge of the worker. To others it seems that 
unless these agencies of production and distribution, which 



The Man and the Dollar 281 

save all unnecessary wastes, are adopted by Americans, we 
must lose the markets that we to-day have, and the mills 
and factories which are now running must be closed and 
thousands turned out of employment permanently. 

Mr. Bryan claims to see in industrial combination a de- 
pression of the price of the raw materials raised by our 
farmers and planters. Others feel that the danger is that 
unless those who buy the raw products and manufacture 
them into finished articles, can do so by the cheapest pro- 
cesses and under the cheapest system of business organ- 
ization, they must lose their markets and no longer have 
any need of the farmers' raw materials. 

Mr. Bryan says he sees in industrial combinations only 
the ultimate certainty that the prices of manufactured 
articles will be extortionately raised. Others see the possi- 
bility of lower prices because of cheaper cost of production, 
and they also observe certain forces that will continually 
tend to lower those prices. 

Mr. Bryan prophesies oppression and extortion by in- 
dustrial combinations, ill-gotten fortunes for the few, and 
poverty and wretchedness for the many. By others the 
danger that is apprehended, is that extravagant meth- 
ods of production and distribution will reduce America to 
the relative industrial position of those nations where in- 
dustry is disorganized and unregulated. Where is there 
the greatest national prosperity? Where is there the high- 
est standard of individual living? Is it in Spain and 
Turkey, where wealth is seldom combined and centralized, 
or in Germany and the United States, with their vast busi- ' 
ness organizations? 

Is there any doubt in the mind of any one that all 
classes — capitalists, middle classes, or wage-earners, what- 
ever you may choose to call them — enjoy to-day a higher 
degree of prosperity and a nobler quality of civilization 



282 The Trusts 

than they have in previous ages? Have not the comforts 
of life been made plentiful and cheap by reason of the 
aggregation of capital? In centuries gone by, people had 
meat but once a week; houses were without chimneys and 
without windows; books were so rare that they were chained 
to the walls of churches; plague and pestilence worked 
havoc with the poor; the laborer was little better than a 
slave; he was in abject wretchedness, in political bondage, 
in densest ignorance; he was not a freeman, he was a serf. 
The very rich, even royalty, did not have those things 
which to-day are considered the necessities of poor people, 
and which every one possesses. 

The men of the world who have done the most to ad- 
vance not alone its material prosperity but its intellectu- 
ality, its culture, and its civilization, have been its inventors 
and discoverers and explorers; its producers and distribut- 
ers — those who have made wealth more abundant, for the 
largest production means the widest distribution and the 
fairest distribution means the fullest production. There 
have been other emancipation proclamations than Lin- 
coln's immortal paper. They have been promulgated not 
by statesmen, but by those who have found or fashioned 
the new things that have transformed industrial methods. 
An enlarged liberty for mankind was heralded when Watt 
invented the steam engine, when Stephenson made his 
locomotive, when Fulton first sailed up ,the Hudson with 
the Clermont, when Eli Whitney revolutionized the in- 
dustries and changed the destiny of the South by the in- 
vent ion of the cotton gin, when Arkwright brought forth 
the power-loom, when Bessemer perfected his processes of 
making steel. It is these men and the hundreds of thou- 
sands of men who have organized and managed and con- 
trolled the industries in which all these discoveries and 



The Man and the Dollar 283 

inventions have been utilized, who have really made indus- 
trial freedom possible. 

We need have little fear of that capital which is aggre- 
gated and consolidated for productive purposes. The 
wealth which is the menace to the country is that which 
exists in the form of unproductive wealth. As long as 
money is brought together for productive purposes it can 
do no harm to the public. If a hundred thousand dollars 
or a hundred million dollars of capital, coupled with the 
toil of thousands of laborers, produce goods of any kind, 
the capitalists who produce must sell these goods to others 
before they can obtain any enjoyment or benefit from 
them. If as a result of the sale they acquire more wealth 
and again invest it in productive enterprises, they inevi- 
tably create a greater demand for labor, and it follows 
necessarily that there must be higher wages far the work- 
ers, since wages depend not upon the number of employers, 
but upon the amount of work to be done. It follows also 
that there must be lower prices in proportion to the in- 
creased abundance of the articles to be sold, for outside of 
life's most absolute necessities, the price of things to be 
sold depends not so much upon the number of sellers as 
upon the number of articles to be sold. 

It is by no means well established that corporations tend 
to centralize wealth; that is, that they tend to build up 
great private fortunes. The contrary would in all proba- 
bility be the result if we could have honest corporate man- 
agement — if the stockholder with one share felt certain 
that he would have his fair pro rata of the earnings. The 
man with a hundred dollars to-day places them in the 
savings bank and gets three or four per cent interest; but 
when these small sums have been aggregated into one great 
sum in the savings bank, along comes the railway company 
and sells to the bank its bonds (for savings banks are now 



284 The Trusts 

allowed in many states to invest in railway bonds), borrows 
the money at four or five per cent, and with it earns a 
greater sum. We repeat, it is by no means certain that 
corporations do have the effect of centralizing wealth. The 
stock books of many of our great railway corporations show 
that the average holdings are becoming smaller. It is 
almost impossible to tell whether this is the result of the 
investment of the savings of persons of limited means, or 
whether it comes from a more general distribution by large 
capitalists of their holdings in stocks. 

There is one fact, however, which is pregnant with sig- 
nificance. It is that rates of interest as well as dividends 
are decreasing, while wages are increasing and hours of 
labor are shortening. Furthermore, the prices of those 
products which are made by business enterprises in which 
concentration of wealth is possible, are decreasing. It is 
only in the case of agricultural products, where concen- 
tration is impossible, that we see a general increase. As 
the capital of the wealthy increases, it brings them a con- 
stantly decreasing income. Its increment is invested in 
enterprises for enlarged production of articles, the prices 
of which are constantly lessening, but which give more 
and more employment, and therefore tend to increase the 
wages of the toiler. 

Industrial combination does not mean industrial slavery; 
it means industrial freedom. The employees in large fac- 
tories invariably are less subject to the will and the wish 
of their employers than is the man who works in the store 
or the shop where he has but few co-workers. Another 
truth which is indisputable is that the wage-earner who is 
most free from the dictation of his employer, is the man 
who is employed by the person whose business is prosper- 
ous, whose orders for goods are numerous, whose factory 
and mill are running to their full capacity, whose profits 



The Man and the Dollar 285 

are large; while, on the other hand, the person who is 
producing at no profit, who has no orders ahead, who has 
need of no new employees, and who can hardly find wouk 
for those then in his employ, can afford to be, and fre- 
quently is, an absolute despot. 

It has been well said: " The great need of society to- 
day is not individualism in the production of wealth, but 
individualism in citizenship." The great lesson of history 
is that if men would accomplish the greatest results, they 
must work together. Socialism and individualism are not 
altogether antagonistic; they are complementary. What 
the working people want to-day — what they need, and 
what they wish, and what they are clamoring for — is for 
more time for social and intellectual advancement, and less 
time for physical toil. They ask for eight hours for work 
and eight hours for rest and eight hours for recreation and 
education — and the request is a proper one. When it is 
granted the chimes of history may well ring out, for they 
will ring in a new era in civilization. What the laboring 
man wants is steady employment, higher wages, and a fair 
proportion of leisure. He is much more apt to get them 
when his employer has cut off every waste in his methods 
of production and distribution. The freedom and liberty 
of the workingman depend not on the fact that he works 
for wages, but upon the amount of his wages, and that 
depends upon the amount of work that is to be done. The 
workingman never can prosper unless his employer pros- 
pers. The more prosperous the business of the employer, 
sooner or later the more prosperous will be the employee. 

It is said that trusts are corrupting our political life. 
That is largely due to the special privileges that we hold 
out before them. Abolish them; take away the tempta- 
tion to corruption, and corruption will cease. It is said 
that the industrial combinations of the day are a political 



286 The Trusts 

menace because they produce inequality of wealth and that 
a democratic government cannot exist if there is not a 
reasonable equality of fortune among men; but we believe 
we have shown satisfactorily that the aggregation of pro- 
ductive wealth tends to lessen the inequalities rather than 
to increase them. The danger arising from wealth is not 
in the aggregation of wealth in industrial combinations, in 
productive enterprises, but in the withdrawal of wealth into 
channels that are unproductive. It lies in the extrava- 
gance of the rich, in the vast sums that are put into arti- 
cles that cannot themselves be productive of new wealth. 

In conclusion, we repeat, the true policy is to adopt that 
system of industry which will place the man not only before 
the dollar, hut within reach of it. The wisest statesmanship 
will be to put the man above the dollar by enabling him to 
obtain it and to use it to rise superior to his present condition. 



CHAPTEE XV. 
LEGISLATIVE POWERS OVER TRUSTS. 

Before we can with any advantage consider the question 
of what legislative remedies we can seek for the evils of 
trusts, it will be necessary to consider the scope which, 
under the Constitution, national laws upon the subject can 
have, and also the limitations upon state statutes. It 
will also be wise to give some consideration to the results 
of statutes which have already been enacted. The anti- 
trust laws, both those which have been enacted and those 
which have been proposed, involve grave constitutional 
questions. Inasmuch as these laws are comparatively new 
and inasmuch as few of them have been passed upon by 
the courts of last resort, many of these questions can not 
be said to be authoritatively answered; still there are pre- 
cedents which foreshadow the final decisions of the courts 
whenever cases shall come before them in which consti- 
tutional provisions shall be applied to anti-trust laws; and 
there have been a few decisions by the Supreme Court of 
the United States touching these laws themselves. 

The Federal legislation upon the subject of trusts con- 
sists of an act passed in 1890, which is known by the name 
of Senator John Sherman, who was active in securing its ( 
passage. We give that act complete in Appendix A. 
In two recent cases, one known as the Trans-Missouri case, 
and the other as the Joint Traffic case, the Sherman act 
was held to apply to railway pools, that is, to eombina- 

287 



288 The Trusts 

tions of railway companies for the purpose of maintain- 
ing rates, — even when the rates to be maintained were not 
unreasonable in amount. But the matter of practical in- 
terest now is its applicability to industrial combinations 
known as trusts, for the suppression of which it was de- 
signed. We quote from a recent article in The North 
American Review for September, 1899, entitled " Legal 
Aspects of Trusts/' written by Mr. Joseph S. Auerbach, a 
well-known corporation lawyer of New York City. The 
following paragraphs taken from his article and embodying 
two or* three extracts from the decision of the United 
States Supreme Court in the Knight case, often called the 
Sugar Trust case, and decided a few years ago, show the 
limit of the power of Congress to deal with industrial com- 
binations, and also refer to the limit upon the powers of 
states to deal with interstate commerce. From them it will 
be seen that Congress has no constitutional power to stop 
industrial combinations that are engaged in manufacturiiig, 
even though they are monopolies. It can only prevent 
them from directly restraining interstate commerce: 

" Congress has such power only as has been specially conferred 
upon it by the Constitution, and the authority for the (Sherman) 
Act is found in the provision of the Constitution, that Congress 
shall have power * to regulate commerce with foreign nations and 
among the several states and the Indian tribes/ 

" This provision of the Constitution, however, confers upon Con- 
gress the sole authority to legislate upon questions affecting such 
commerce, and all attempts on the part of the states to defeat this 
exclusive right vested in Congress, whether by imposing discrimi- 
nating taxes, or taxes upon goods in original packages, or by a tax 
upon the agencies employed in carrying on that commerce, have 
been condemned by the Supreme Court of the United States. 

" Any attempt also on the part of the states to bring under their 
control or regulation any article the subject of trade or commerce, — 
except where Congress has first conferred upon the state that 
right of control or regulation, — has been likewise condemned. 



Legislative Powers over Trusts 289 

Even where such right of control or regulation has been authorized 
by Congress, it has been confined by the Supreme Court to those 
cases which come within the proper exercise of the police power of 
the state. 

" The Act of Congress quoted above (the Sherman Act) has been 
repeatedly construed by the Supreme Court of the United States 
in cases which have excited general interest. It was sought to 
apply the Act to the case of a corporation seeking, as alleged by 
the Government, to acquire a monopoly of the manufacture of 
sugar, which might be, and which in all probabilty would be, the 
subject of trade or commerce; and the corporation conceded that it 
was attempting through the acts complained of to exercise a greater 
control of the business in which it was engaged. The Court de- 
clined to regard the Act as applicable to this state of facts. 

" The Court said, Chief Justice Fuller writing the opinion : 

" * The fact that an article is manufactured for export to another 
state does not of itself make it an article of interstate commerce, 
and the intent of the manufacturer does not determine the time 
when the article or product passes from the control of the state and 
belongs to Congress.' 

"And the Court used these still more important words: 

" ' Contracts, combinations or conspiracies to control domestic 
enterprise in manufacture, agriculture, mining, production in all 
its forms, or to raise or lower prices or wages might unquestionably 
tend to restrain external as well as domestic trade, but the re- 
straint w^ould be an indirect result, however inevitable and what- 
ever its extent, and such result would not necessarily determine 
the object of the contract, combination or conspiracy. 

" ' Nevertheless, it does not follow that an attempt to monopolize 
or the actual monopoly of the manufacture, was an attempt, whether 
executory or consummated, to monopolize commerce, even though 
in order to dispose of the product the instrumentality of commerce 
teas necessarily invoked.' 

" So that the Supreme Court, as stated above, has limited the 
objects of the (Sherman) Act to matters clearly and unmistakably 
relating to interstate commerce, and has declined to permit the 
states to interfere with any product or article the subject of inter- 
state commerce, except where, as pointed out above, Congress had 
authorized the state to exercise over such article or product its 
police power of regulation and control similar to that exercised as 
to like articles produced within its own territory." 



290 The Trusts 

It would seem as if the Sherman law was a complete and 
full exercise of the right of Congress to legislate upon the 
subject of trusts, and as if nothing further could be done 
until the Constitution of the United States was amended 
so as to give Congress further power. The only additional 
legislation on the part of Congress, under the present con- 
stitutional provisions, would be additional penalties and 
new methods of procedure. This is what the House of 
Kepresentatives, during the session now drawing to a close 
(June 5, 1900), has been trying to bring about. A bill was 
introduced by one of the Eepublican Congressmen and 
favorably reported by the Judiciary Committee of the 
House and early in June passed by the House, amending 
the Sherman law in certain particulars. Only one vote 
was recorded against the measure. But the changes which 
were made were, as has been said, principally matters 
of procedure and increased penalties. They covered no 
new causes. [See Appendix B.] 

Let us now consider the scope of state laws designed to 
regulate or suppress trusts. In the first place, Congress 
has exclusive right to legislate concerning interstate com- 
merce. None of the states have any right to interfere with 
interstate commerce or with the objects of interstate 
commerce, unless Congress specifically delegates them the 
power to do so. It is necessary to keep thoroughly in mind 
this limitation upon state authority because it practically 
prevents any effectual legislation on the part of states for 
the suppression and control of trusts. To give an example 
of this limitation, it may be said that at one time 
the legislature of the State of Pennsylvania passed an 
act prohibiting the manufacture and sale of oleomargarine 
within that state, and the Supreme Court of the United 
States held that that law was not in violation of the pro- 
visions of the United States Constitution prohibiting states 



Legislative Powers over Trusts 291 

from passing any law that would deprive one of life, lib- 
erty, or property. But when it was attempted to apply the 
same act to shut out oleomargarine which was sent into 
Pennsylvania from another state, the Court said: 

"The Powell case" (the first case decided) "did not and could 
not involve the rights of an importer under the commerce clause.. 
The right of a state to enact laws in relation to the administra 
of its internal affairs is one thing, and the right of a state^to pre- 
vent the introduction within its limits of an article of commerce 
is another and a totally different thing. Legislation which has its 
effect wholly within the state and upon products manufactured 
and sold therein, might be held valid as not in violation of any 
provision of the Federal Constitution when at the same time legis- 
lation directed toward prohibiting the importation within the 
state of the same article manufactured outside of its limits might 
be regarded as illegal, because in violation of the rights of citizens 
of other states arising under the commerce clause of that instru- 
ment" 

The importance of this is that, when applied to trusts, 
it practically means that although shut out from obtaining 
a domicile or establishing themselves in a state, they may, 
nevertheless, ship their goods into it if they can obtain a 
legal domicile in any other state. Corporations are crea- 
tures of the state in which they are incorporated, and the 
state which incorporates them may impose upon them at 
the time of their creation such conditions as it deems 
proper. But when states undertake to deal with corpora- 
tions chartered by other states, although they may deny 
them the right to acquire a domicile within their territory 
or to settle within their limits to do business, yet it seems 
they have no more power to interfere with interstate com- 
merce and to prohibit a trust established and located in an- 
other state from shipping goods into its territory, than they 
have to interfere with interstate commerce when con- 
ducted by private persons. Mr. Auerbach's statement of 
the law on this subject is so clear, and is made by so 



/ 



292 The Trusts 

eminent an authority, that we quote again from the article 
by him: 

" It has been held in a series of cases by the Supreme Court that 
each state shall be the judge of the conditions under which for- 
eign corporations shall be admitted to do business within its ter- 
ritory, and that discriminating provisions of a state in favor of its 
own corporations as against foreign corporations are not in conflict 
with the clause of the Constitution of the United States which de- 
clares that 'the citizens of each state shall be entitled to all the 
privileges and immunities of citizens in the several states.' 

"It has been held, however, that when the question involved is 
one of interstate trade or commerce, a foreign corporation stands 
upon the same footing as an individual. 

" Every state, therefore, has a liberty, and almost a license, in 
determining what class of corporations shall be admitted to its ter- 
ritory, and the conditions under which they are to be admitted, 
save only that it shall do nothing which in effect regulates trade or 
commerce carried on by a foreign corporation. It can determine 
that a foreign corporation shall not have a legal status there, but 
it has no right to restrict, embarrass, interfere with, or have any 
regulation over a foreign corporation selling its goods through 
solicitors or representatives, or otherwise carrying on interstate 
trade or commerce within its territory. 

"Exclusion is not feasible; it is a mere academic right on the 
part of the states, for the exclusion cannot be absolute, since the 
foreign corporation can cross the border of the state, and, as a 
trading corporation, exercise the rights of an individual to the ex- 
tent of disposing of its product by solicitors, or canvassers, and 
where the product or article dealt in requires skill in its installa- 
tion, may actually instal and set up the article disposed of. . . . 

"Corporations, therefore, domiciled in New Jersey and trading 
elsewhere have nothing to fear and no favors to ask of any hostile 
state. Such state may say that they shall not be domiciled there, 
that they shall not own real estate there except on its own terms. 
The state may exclude the corporations altogether from a domicile, 
but it may go no further. These corporations may come and go 
from one end of the land to the other to carry on interstate com- 
merce, and no state barriers or regulations shall affect them. There 
are no state lines for the individual or corporation carrying on 
that commerce." 



Legislative Powers over Trusts 293 

It is therefore seen that however wise and conservative 
the laws of New York State or of any other one state may- 
be, however much they may exact publicity, however much 
they may prevent over-capitalization, however much they 
may provide against corporate mismanagement, and how- 
ever much they may require that corporations shall sub- 
mit to official inspection, yet there is nothing that will 
prevent corporations organized in New Jersey, Delaware, 
Arizona, Illinois, Florida, or any other state in the Union 
whose laws may be most lax, from shipping their goods 
into and from selling them in New York or in any state of 
the Union. Doubtless the State of New York could pre- 
vent these foreign corporations from acquiring a domicile, 
from establishing or maintaining factories within its bor- 
ders, but could not prevent them from carrying on inter- 
state commerce with its citizens. It could not tax 
their agents; it could not shut out their goods; it 
could not tax their goods while in transit, and even if it 
should deny to a foreign corporation the right to sue in the 
state courts to recover the price of the goods, the foreign 
corporation could pursue its remedies in the Federal 
courts. 

There are also many restrictions upon the rights of 
state legislatures to pass laws relating to trusts and com- 
binations, even when the provisions of the laws are ex- 
pressly limited to existing corporations chartered by that 
particular state, or when limited to citizens of the state 
itself. These restrictions are imposed by the fourteenth 
amendment to the United States Constitution, which de- 
clares that no state shall deprive any person of life, lib- 
erty, or property without due process of law. The Supreme 
Court has declared that the right to liberty means more 
than freedom from incarceration, and the right to property 
means more than not having it destroyed or demolished. 



294 The Trusts 

It means the right to use and enjoy it; to make contracts 
with reference to it; to hold it or to sell it as one 
pleases, except in so far as the state may restrict such acts 
in the exercise of its police powers, that is, in the exercise 
of its power to restrain one from making such a use of his 
own property as works an injury to another, or violates 
the rights of another. It has been strongly argued that the 
right of contract implies not only the right to compete, but 
the right to refrain from competing, and the right also to 
agree with others to refrain from competing; and that it 
is only when competition is unreasonably restrained that it 
can be forbidden. It must be admitted that there are 
many decisions of the courts of the State of New York, 
both before and since the passage of its anti-trust act of 
1897, which seem to support this contention; and the 
decisions of the Supreme Court of the United States seem 
to hold that the acts which are forbidden and punished as 
restraints upon interstate commerce, are only those a*cts, 
contracts, agreements, or combinations whose direct and 
immediate effect is to restrain interstate commerce. The 
same court has also used language in its decisions which 
would seem to lay down the doctrine that contracts of 
private individuals or of private corporations (not quasi- 
public corporations like railroads, gas companies, water 
companies, etc.), in order to be punishable as restraints 
upon trade must be unreasonable restraints. These dicta 
would seem to have committed the court to a doctrine 
which would require them to pronounce any state law that 
denied one the right to make a contract, which only rea- 
sonably restrained competition, as being unconstitutional 
and void. On the other hand, the decisions of the court 
have been such that it can hardly fail to declare all such 
restraints as are imposed by the great trusts which absorb 
all or nearly all the productive agencies in any one in- 



Legislative Powers over Trusts 295 

dustry, as being unreasonable restraints and as creating 
monopolies. 

It may not be amiss to make brief mention of the num- 
ber and character of existing state anti-trust laws. Mr. 
Charles F. Beach, Sr., in his treatise on the Law of Mon- 
opolies and Industrial Trusts published in 1898, shows 
that at that time thirty-one of the states had laws pro* 
hibiting trusts, monopolies, pools, and industrial combina- 
tions. We give in Appendix C certain sections of the 
New York law. Anti-trust law^s of the various states dif- 
fer from each other in many particulars; and yet it is 
generally true that all or nearly all of them attempt to 
prohibit in express terms all contracts or arrangements 
that may effect any restraint of trade or competition, 
whether express or implied, reasonable or unreasonable. 
In 1894, when Ernst Von Halle wrote his book on Trusts, 
to which reference has been made, there were anti-trust 
laws in about twenty-two states and one territory, besides 
the one enacted by the Federal government. In nearly 
every one of the states it was declared to be a criminal 
conspiracy for two or more persons to agree to regulate 
or fix the price of any article, or to fix or limit the quan- 
tity of any article to be manufactured or produced or sold; 
or to make a contract restraining competition. All such 
combinations are declared void; and those who formed 
them were punishable with heavy fines and imprisonment. 
Not infrequently all such combinations were denied the 
right to sue in the state courts to recover the price of goods 
sold by them. Since 1894 the statutes have been made - 
more stringent. The Texas law, enacted one or two years 
ago, is perhaps the most drastic and most sweeping; but 
the law of nearly every state forbids all attempts by agree- 
ment to stop competition, to regulate production, to fix 
prices, and to create monopolies. V" 



296 The Trusts 

The limitations of the power of the National Congress 
in dealing with trusts, and the restrictions upon the power 
of the states to interfere with interstate commerce, — the 
fact that the National government can not forbid com- 
binations of manufacturers, even if monopolies, and can 
regulate only interstate commerce; and on the other hand, 
the fact that the states, although they can forbid unrea- 
sonable restraints of competition, and can impose condi- 
tions upon the corporations chartered by themselves, and 
can also impose conditions upon foreign corporations that 
seek to locate within their limits, yet cannot prevent for- 
eign corporations from sending their goods within their 
borders and selling them there, — these things show clearly 
that, if we are to have efficient legislation, whether that 

4 legislation be regulative or destructive of trusts, we must 
have an amendment to the United States Constitution. It 
would be absolutely paralyzing to business as well as de- 
structive of political harmony between the states, to give 
to the states any authority over interstate commerce. The 
prosperity of the country has been due to the absolute free- 
dom of trade between all sections. The great weakness of 
the original confederation which was formed by the col- 
onies after the Kevolution, was in the diversity and complete 
lack of harmony between the laws of the several states re- 
lating to commerce, in the arbitrary and unjust restrictions 
and impositions placed by the various colonies upon trade 
with each other. The modern facilities for transportation 
and communication have welded the states more and more 
firmly together. Our business affairs are now as wide as 
our continent. The great difficulty so far in dealing with 
trusts has been that business transactions have reached 
far beyond the jurisdiction of any court that had control 
of them. It has become a necessity for the Federal Con- 
gress to have greater power over business given to it. That 



Legislative Powers over Trusts 297 

is the conviction of economists, statesmen, business men, 
and politicians. Prof. Henry C. Adams and Ernst Von 
Halle advocate it: even Mr. Bryan has admitted that it 
may become necessary to do this. Scores and hundreds of 
other students of the trust problem, Democrats as well 
as Republicans, have admitted the necessity of a consti- 
tutional amendment giving Congress power over corpora- 
tions and other business enterprises which are so great that 
they must of necessity engage in interstate commerce. The 
Democratic platform of 1896 demanded a stricter Federal 
supervision. Yet when the Eepublican party in the House 
of Eepresentatives, in May and June, 1900, proposed 
an amendment which would have enabled Congress effec- 
tively to deal with trusts, the Democrats, with but five 
exceptions, voted against it; and, since a two-thirds vote 
was necessary, killed the proposition. If people, who are 
trying to sit down hard on trusts, find, in coming years, 
that they are sitting down between two stools, — one, in- 
adequate Federal legislation, and the other, insufficient 
state legislation, — National laws that cannot touch trusts 
and state laws that cannot reach them, — let them remember 
that it is due to the action of the representatives of that 
party which is so strongly wedded to the doctrine of state 
rights, that it will sacrifice the only means of obtaining 
practical remedies for oppressive evils, in order to be consis- 
tent in its adherence to a theory of government which the 
course of events, the progress of the world, and all the 
achievements of invention and discovery, by unifying the 
states into one indissoluble union, are continually and in- - 
exorably demanding shall be modified so as to accord with 
existing conditions. 

There are some significant facts -to be observed in con- 
nection with the anti-trust legislation of the United States. 
Since that legislation, — since 1887, for example, — there has 



298 The Trusts 

been a vast increase in the number of trusts. The old 
form of organization, the trust proper, has been given up; 
but innumerable gigantic corporations have sprung up. 
The power is more centralized than ever, competition is 
more effectually restrained; and yet the form of organiza- 
tion is such that it is somewhat inaccurate to speak of it 
as a combination, and very difficult to cause its abolition as 
a combination. It is difficult to frame laws forbidding 
it to purchase property, which will not forbid purchases 
of property by others. Along with the corporations have 
come many corporation evils, such as over-capitaliza- 
tion, corporation mismanagement, stock gambling, and 
kindred evils. It is by no means certain that our " latter 
end is not worse than our first." The only gain, — per- 
haps a gain that will more than offset all the evils, — has 
been that, in compelling combinations to incorporate, we 
have compelled them to assume a form of organization 
which, because it is artificial and because it is the creation 
of the state, is peculiarly subject to limitation and regula- 
tion by the state. Our laws have not succeeded very well 
in killing trusts. They have only brought about a form of 
organization which renders trusts easier to control than 
when they consisted of private individuals bound together 
by private agreements. 



CHAPTEE XVI. 
THE REMEDY FOR THE EVILS. 

"We come now to that momentous question, which re- 
mains unanswered after over a decade of consideration. 
The question of the hour, the question, indeed, of the era, 
is: "What is the remedy for the evils of trusts? Shall 
we abolish trusts entirely? Shall we kill the trusts?" The 
popular answer has always been, "Yes." The National 
Congress by passing the Sherman act has said, " Destroy 
the trusts." The legislatures of thirty-one states by en- 
actments that are drastic and sweeping, declare that trusts 
must be stamped out. Every member of the House of 
Kepresentatives,with one exception only, by voting in favor 
of the amendments to the Sherman act, making its pen- 
alties more severe and prescribing a course of procedure 
more certain to give effect to the law, has said that trusts 
must go. The platforms of all the political parties, — Ke- 
publican, Democratic, National-Democratic, Social-Demo- 
cratic, Populistic, and Prohibitionist, — differ only in the 
vigor of their expressions of denunciation of trusts. Like 
Cato's letters which were never closed without the declara- 
tion, a Carthage must be destroyed," no political document, 
whether it be a message of an executive, a speech of a - 
legislative candidate, or the platform of a party organiza- 
tion, is complete without its threat of extinction of trusts. 
The subject, indeed, is worthy of profound consideration. 

Before we attempt to suggest remedies, or to sum up 

299 



300 The Trusts 

the remedies already suggested, let us make a resume of 
our study of trusts, and at the risk of being very peculiar 
and exceptional, let us consider what are the evils of trusts. 
First, then, we have seen that we are living in a day of great 
things. Business opportunities are gigantic, industrial un- 
dertakings are enormous, commercial projects are vast, 
and great business organizations have become a necessity; 
since the dawn of industry, there has been a constant ten- 
dency for them to increase in size. Next, the present sys- 
tem of business is characterized by excessive competition: 
there seems to be a tendency to carry the struggle of com- 
petition to such an extent that it becomes injurious to the 
consumers as well as ruinous to the competitors themselves. 
Modern competition is destructive and self-destructive; it 
has a tendency to end in monopoly itself. Modern com- 
petition is often unreasonable, and, if it were not for the 
possibility of unreasonable restraints, agreements for its 
discontinuance would commend themselves to the public 
as being highly proper. Consolidation and combination 
render possible cheaper production and infinitely cheaper dis- 
tribution; the competitive system is so expensive in its 
operation that the price we pay for many articles is far in 
excess of the cost of actual production plus what would 
be a fair profit, if the best and most perfect methods of 
organization were adopted. There are gigantic evils re- 
sulting from the lack of regulation of industry; consoli- 
dation makes possible a better control, and will enable those 
adopting this form of organization to sell goods at lower 
prices. 

It is only by avoiding all the wastes of excessive com- 
petition, by availing ourselves of all the savings of com- 
bination and consolidation, by seizing all the economic ad- 
vantages of great industrial organizations, in addition to 
adopting the latest and most improved machines and proc- 



The Remedy for the Evils 301 

esses, that we can lessen the cost of production and lower 
the prices of our goods, without cutting down wages and 
without depressing the prices paid for raw materials. We 
must lower our prices in some way to meet the prices made 
by the intense competition of the day, or lose our trade 
and call down upon ourselves industrial ruin. Perfection 
of business organization, supplementing perfection of me- 
chanical equipment, is the only way in which we can win 
in the international struggle for industrial supremacy, — 
the only way in which we can obtain foreign markets for 
our products which, in nearly every industry, are in ex- 
cess of home consumption, — the only way in which we 
can keep our wage-earners constantly employed at remun- 
erative wages, or increase or even continue the present de- 
mand for raw materials, — the only way in which we can 
constantly cheapen the cost of our goods and advan- 
tageously lower prices. To prevent or restrain all com- 
binations and consolidations and concentrations of capital 
and skill, would be the greatest business folly in the. world's 
history, — an act sure to result in bankruptcy, misery, and 
wretchedness. 

Worse than competition, however, is monopoly, — the 
paralysis of business, the obstacle to all progress, the bane 
of liberty. Monopoly, whether it be the result of exclusive 
privileges and legal rights granted by the sovereign or sim- 
ply that degree of control over an industry which enables 
one person or group of persons, at will, to fix prices, to 
determine production, to establish wages or to depress the 
prices of raw materials in any field of industry, is evil and 
only evil. Whatever may be the benefits of trusts or in- 
dustrial combinations, if, for any length of time, those who 
form them are able to keep prices unduly high, injury to 
all classes and conditions will result, and only injury. 

When there are no legal restrictions and no special priv- 



302 The Trusts 

ileges, trusts are not legal monopolies. Neither can they 
permanently be practical monopolies. Competition is sure 
to spring up, if undue prices are charged. The constant 
increase in the wealth of the world causes capital always 
to look out continuously for opportunities for investment; 
just as water seeks its lowest level, so capital is sure to 
invest in the business that gives promise of the greatest 
profit. The fear of competition, — potential competition, — 
is a powerful restraint upon the temptation to charge high 
prices. But trusts for temporary periods have the power 
of being really and actually oppressive, exacting, and merci- 
less monopolies. Such they may be and very frequently are, 
pending the establishment of new competition. Further- 
more, the trusts, by using competition as a weapon and by 
practicing cut-throat competition and by selling at times 
or in special localities at prices far below cost, are able to 
crush out new competition; and the knowledge of the 
custom of trusts to use these unscrupulous means is always 
a deterrent to the establishment of competition. It crushes 
out active competition, and greatly weakens the force of 
potential competition. Competition is, moreover, gener- 
ally an uneconomic remedy for trust evils. In reality, the 
establishment of a new enterprise for the purpose of lower- 
ing prices is a waste of national wealth, whenever the ex- 
isting productive agencies have a capapity equal to or in 
excess of the existing demand; and in nearly all our in- 
dustries, there is to-day such a condition. While this con- 
dition deters competition, even although the various enter- 
prises of the industry are individually controlled and man- 
aged, and while, perhaps, competition is no more deterred 
when all these productive industries (with a capacity in 
excess of the demand) are aggregated into one organization; 
yet whether the restraint is greater or less, in case of ag- 
gregation or lack of aggregation, competition is always an 



The Remedy for the Evils 303 

uneconomic remedy, when the capacity of existing agencies 
exceeds the demand; and therefore potential competition 
is not a wholly wise remedy for the evils of trusts. It is 
true that the enterprise and hopefulness of business men 
are such that even under the conditions of industry just 
mentioned, competition in time will spring up if prices are 
high and if there is the possibility of acquiring profit. But 
this generally being wasteful it is the part of wisdom not 
to rely on it wholly as a remedy for high prices, but to pre- 
vent combinations, if possible from acquiring so great a 
control of any industry as to be practical monopolies. An 
enlightened self-interest would keep trust owners from 
charging extortionate prices and thereby inviting their 
own ultimate destruction by creating competition. But 
greed and selfishness are apt to blind one to true self-inter- 
est; and trust owners are constantly tempted to raise prices 
unduly. Every economic advantage of the trust to the 
producer as well as to the consumer is lost if (and so long 
as) such a policy is pursued. Cheap production is of no 
advantage, but may be of positive harm, if prices are not 
lowered. Even though the evils of trusts are only tempo- 
rary, as is true, they are grievous. The underlying evil is the 
occasional imposition of an extortionate price; the cause 
of the evil is the possession by the trust of all or nearly all 
the productive agencies in an industry in which for a time 
competition is rendered inactive because new establish- 
ments in that industry are not needed for productive pur- 
poses. In the train of an extortionate price there follow 
these evils: lessened consumption, diminished production, . 
lack of employment, lower wages, depressed prices for raw 
materials, stagnation, and general bankruptcy. 

Some of the trusts are undoubtedly formed for the pur- 
pose of securing the economic advantages of combination, 
but a very large number of them are brought into being 



304 The Trusts 

and are sustained by means of special privileges, such as 
public franchises, railroad discrimination, unequal taxation, 
and other forms of partiality, which enable the favored 
parties to crush out the competitors who are not thus fav- 
ored. Careful students of the trust problem believe that a 
vast majority of the trusts of to-day owe their existence as 
well as strength, not to their economic superiority, but to 
their possession of special privileges. These privileges, even 
if not the cause of the trusts, are certainly the cause of a 
very large portion of trust evils, for in proportion as special 
privileges are accorded, the favored organizations are re- 
lieved from the necessity of giving to the community better 
service and lower prices. Furthermore, it is beyond ques- 
tion that while the desire of adopting the most economical 
methods of organization is the motive that actuates a num- 
ber of the persons entering into trusts, yet nearly all the 
trusts which have been formed within the last three years 
have been the inflations of the " promoter " rather than the 
combinations of the real producers. Their purpose has 
largely been to sell to the investing public the over-capital- 
ized stock of these corporations; and the result of the over- 
capitalization has been a tendency to impose high prices 
for the purpose of accumulating, even though temporarily, 
dividends which would give an apparent value to the stock 
in excess of its real value; another result has been to 
stimulate stock gambling, corporate mfsmanagement, and 
improper manipulation of the securities of the company 
not only by speculators, but also by the officers of the com- 
panies themselves. This has resulted in those in charge 
of great trusts not infrequently giving their time and 
energy to manipulation rather than to management. It 
has largely impaired public confidence. It has filled the 
financial condition of the country with much uncertainty. 
It has so destroyed confidence that panics have resulted. 



The Remedy for the Evils 305 

It is thus seen that we have certain evils apparently in- 
herent in trusts, but that they are temporary. We also 
have numerous incidental evils. The great remedy may 
be said to be competition. This is true notwithstanding 
trusts are formed in order to limit competition; and not- 
withstanding there are limitations to competition as a rem- 
edy for trust evils. But what are the specific remedies? 

Abolish all special privileges; prohibit and absolutely 
prevent railroad discrimination; lower the tariff, — not when- 
ever we can obtain our goods from abroad at a lower rate, 
but whenever the prices exacted by any trust or any corpor- 
ation or any individual are in excess of a fair profit after 
paying American wages. The establishment of an export 
trade in any article should be treated as presumptive evi- 
dence of the lack of need of a tariff, and the tariff upon 
such article should be continued only when it has been 
clearly shown that sales abroad are the result of excep- 
tional circumstances. If the patent laws are being per- 
verted from their true purpose, let them be modified. Com- 
pel corporations to bear their fair proportion of taxation; 
let the public retain and, in so far as is lawful, retake all 
public utilities and franchises. Eequire corporations to 
pay fair taxation upon the franchises possessed by them, 
as has been done in the State of New York under the 
championship of Governor Eoosevelt. In fine, withdraw 
every special privilege and leave the way open for a free 
fight and a fair field. " But how much can be accomplished 
by this method? " We answer: " Do this, and trusts will 
wither away by the score, if not by the hundred. Do this, 
and trust evils will nearly all be done away with." It is 
somewhat peculiar that those people, who have been most 
actively engaged in that form of anti-trust legislation 
which seeks to render impossible all consolidation and 
combination, — who have been active in framing laws 



3o6 The Trusts 

which, if literally construed, would prevent even such a 
combination or restraint upon trade as the formation of a 
partnership, or the purchase by one man of a factory or 
a store or a farm or any other producing or distributing 
agency which formerly belonged to another, — have, in their 
denunciations of trusts, almost uniformly declared that the 
cause, not only of the existence but of the strength of 
trusts, was special privileges, and yet have not concentrated 
their energies in efforts to abolish these special privileges, 
but have dissipated their energies in their attempts to stop 
all combination, consolidation, and concentration, — condi- 
tions towards which there is a tendency which is universal 
and apparently irresistible, and which has also been the 
trend of all industrial and social progress. Thus Hon. 
Jerry Simpson, the Populist member of Congress from 
Kansas, who is an advocate and supporter of the Kansas 
law against trusts, in his address at the Anti-Trust Confer- 
ence in Chicago, declared: 

" I do not believe, as some do, that the combinations we call 
trusts are the results of orderly evolution in business methods. I 
think I can easily demonstrate that they have their origin in, and 
grow and fatten upon, special privileges conferred by legislative 
bodies; and that without these special privileges it would be im- 
possible for them to exist. If this be true, it would seem that the 
first and most necessary step would be to repeal the laws on which 
they rest, rather than to enact new laws." 

That plank is broad enough for both Jerry Simpson and 
ourselves to stand upon. His remark is one of the sensi- 
ble declarations made in the discussion of trusts. 

In one of the recent numbers of The North American 
Review there appeared an analysis of the Texas anti-trust 
law by Governor Sayers of that state. He was most in- 
strumental in the passage of this law. He even called a 
conference of the governors of all the states of the Union 
for the purpose of considering anti-trust legislation, and 



The Remedy for the Evils 307 

doubtless considered this Texas bill as the acme of per- 
fection. The most interesting thing about the article in 
which the analysis appeared is, that after giving the analysis 
of the law, and after pointing out a few of the evils of 
trusts, Governor Sayers discussed the causes of trusts. We 
quote from his article: 

* It has been asserted by some who claim themselves qualified to 
speak upon the subject, that trusts, as operated in the United 
States, are not harmful, but that they are only the outgrowth of 
an evolution in industrial life that is natural and necessary. On 
the other hand, it is insisted, and I think rightfully, that they are, 
in a great measure, if not entirely, due to vicious legislation, to 
the policy of the Federal government in the matter of currency 
and taxation, and to that of the states in the creation of corpora- 
tions." 

We think, it must be admitted, that the Texas anti-trust 
law is a non-sequitur to the argument advanced by Governor 
Sayers. The weakness of his course in regard to trusts 
is, that he has not attempted to concentrate his energies to 
removing that which he declares to be the cause. This 
is said in no spirit of criticism and with a perfect under- 
standing that Governor Sayers' official influence at that time 
could be asserted only through state legislation. The point 
we would make is this: that the way to abolish trusts is to 
remove their causes. If special privileges are the causes of 
trusts, abrogate those privileges. While we may not all 
agree as to the special privileges that do, in fact, foster 
trusts, yet we can all act unitedly in a campaign directed 
against those things which are concededly privileges that 
have this effect, for the trusts that can succeed only by the 
help of special privileges are economically inferior. The 
trusts that have the special privileges and yet do not need 
them, are thieves and robbers. 

After we have stripped all competitors of special priv- 
ileges; after we have created a fair field for them, we must 



3o8 The Trusts 

take steps to see that there is a fair fight. Unfair com- 
petition, cut-throat competition, that is, the practice of 
selling goods below cost in the locality in which competi- 
tion springs up while charging a higher price in some other 
locality, must be declared by law to be a conspiracy and 
should be punished with severe penalties. The provision 
of the Texas law concerning this kind of competition is 
one worthy of adoption by all states. In like manner these 
great corporations, whose powers are given to them by the 
state and which are able by reason of these charter powers 
to obtain such a great control over industries, must be com- 
pelled to sell to all at the same rates. When so many of 
them combine together that the establishment of new com- 
petitive enterprises becomes economically wasteful, then 
we have the right to treat them as we do common carriers 
and make them serve all alike. 

Publicity must be another great co-ordinate remedy. We 
need it to correct, not only incidental, but inherent evils- of 
trusts; to encourage competition whenever competition is 
practicable, to expose to us the exact nature of the evils 
of trusts, to bring out under the glare of public disap- 
proval those practices which flourish only in darkness and 
secrecy. We must have full, open, and accurate reports 
from trusts, upon forms prepared by the government, sworn 
to by the officers of these corporations. We must also have, 
in the case of gigantic corporations which possess gigantic 
powers, inspection by public officials just as our banks and 
insurance companies are subjected to such inspection; and 
further, we must have full tabulated statistical informa- 
tion. Competition will certainly spring up under such cir- 
cumstances whether or not the competition is, in fact, 
needed. High prices will sooner or later cause the estab- 
lishment of new enterprises; while the fear of new enter- 
prises always has a tendency to keep prices down. Wages 



The Remedy for the Evils 309 

can never be reduced to the starvation point, if the condi- 
tion of both employer and employee is known. Corrup- 
tion will flee when secrecy is dispelled. With equality of 
opportunity, with a fair field and a free fight, there are 
comparatively few business men who to-day would not 
accept the challenge and enter into competition even 
with great corporations. When they did not it would have 
to be considered as an admission of the economic superior- 
ity of the trust. Then let us also enact laws forbidding 
over-capitalization, permitting the issue of stock only for 
cash, or for the actual value of property, — earning capacity 
and good-will to be taken into consideration, but full 
knowledge of that upon which the value is based, to be 
given to the investing public and, if need be, the value of 
these properties to be passed upon by a commission ap- 
pointed for the purpose rather than by the directors and 
officers of the company entrusted with its management and 
under constant temptation to manipulate its affairs. Pub- 
licity will prevent most of these evils; it will stop most of 
the stock manipulation and nearly all of the swindling of 
the investing public. Let us also pass laws more stringently 
regulating corporate management. Let us hold the direct- 
ors and officers to a greater responsibility. It is necessary 
that we limit the liability of stockholders because of the 
impossibility of their managing the affairs of the company, 
but this applies, only in a slight degree, to the boards of 
directors. They have, to a great degree, the control of these 
companies. True, many of the affairs must be managed "bv 
officers chosen by the directors, and acting for them, but. 
it is absurd to limit the liability of these officers, and it is 
equally absurd to limit the liability of the directors as much 
as one does the liability of the stockholders. The directors 
of all corporations should be held to at least the same meas- 
ure of liability that trustees of savings banks and national 



310 The Trusts 

banks assume. It should be made criminal to declare 
dividends if unearned; and there are numerous other evil 
practices in the management of corporations, especially of 
those great corporations known as trusts, which could 
easily be prevented by prohibitory statutes strictly enforced 
and by holding the directors and officers personally respon- 
sible for the corporation^ criminal acts in which they par- 
ticipate. 

So much for the remedies for the incidental abuses of 
trusts: Are there other evils? Are the remedies which 
have been suggested sufficient? We do not say that they 
are, but we express a firm conviction that if these remedies 
could be honestly tried, all that would remain of trusts or 
of trust evils would be relatively insignificant. "Abolish 
special privileges, prevent unfair competition, — cut-throat 
competition, — compel corporations to sell to all upon equal 
terms, give us full publicity, prevent the evils of over- 
capitalization, make corporate management honest, — and 
competition, we believe, will do the rest. * 

But there are other things which we can do, which 
theoretically are perfectly proper, which, at times, may be 
supplementary remedies and, indeed, may be our best 
remedies if we cannot persuade ourselves to adopt those 
already mentioned. We can declare the creation of a 
monopoly to be a crime.* We mean now, not a legal mon- 
opoly but a practical monopoly; that is, the acquirement 
of such a control over an industry that in a certain locality 
and for a length of time, short though it may be, a per- 
son or combination of persons has power to fix the price 
of an article of common use. It will be very difficult — in 
a statute extremely difficult — to define a monopoly of this 
kind; and yet it does not follow that it cannot be done. 
You may search all the law books that were ever written 
and you will find no satisfactory definition of " fraud." The 



The Remedy for the Evils 311 

courts, though for centuries they have had to deal with 
fraud, have never yet undertaken to define it with any 
accuracy, for the reason that, if once defined, some one 
would perpetrate a fraud that would fall outside of the 
definition. But the courts thousands of times in every year 
in every state declare contracts void because of fraud; and 
so, although it may be impossible to frame any satisfac- 
tory definition of monopoly, that is, of what we may 
term " practical monopoly" as distinguished from legal 
monopoly, or exclusive right given by the sovereign, yet 
our courts have not shown themselves incompetent to dis- 
cern it or unable to punish it. " Ye shall know them by 
their fruits " is as applicable to monopoly as it was to the 
men of hypocritical pretensions of whom the words were 
first spoken. You can ascertain whether a combination is 
a monopoly by observing what it does and how it does it. 
When a great aggregation or combination acquires such a 
control over industry as has the American Ice Company, 
for example; when the people for weeks look in vain for 
any other source from which they may obtain their supply 
of this necessity of life; when they see the few men who 
are the officers of this trust raising the price from thirty 
cents to sixty cents a hundred (even though it is for only 
a month); when they find this company in possession of 
docking privileges which are so exceptionally convenient 
and advantageous that they are almost exclusive; when they 
see it mercilessly refusing to sell ice in small quantities to 
the poor (refusing to sell five-cent pieces until compelled 
to do so by the force of a righteous public indignation), 
although having practically the sole supply of ice; when 
they recall the fact that this company sold its ice a year 
ago in most localities for thirty cents a hundred, yet that 
in another locality where competition existed, it reduced 
the price to ten cents a hundred so as to crush out its com- 



312 The Trusts 

petitor; when they observe it leaguing itself with cer- 
tain officers who have charge of the docks where ice 
must be unloaded, with other officers whose duty it is 
to make contracts for the purchase of ice for the great 
municipality in which they have secured all the available 
supply, with politicians who control, with more than a 
czar's despotism, the political machinery of New York City, 
with judges, by whom questions as to the legality of the 
trust or as to the criminality of the acts of its officers would 
naturally have been brought, — when all these facts are 
brought together, no man in the possession of his senses, 
no man whose intellect is not clouded by idiocy, no man 
whose judgment is not obscured by his prejudices; no man 
who can read human motives from human acts or reason 
from cause to effect, can doubt for one moment that the 
purpose of this trust was to secure a monopoly; that for 
a time it was a grinding, merciless, and oppressive mon- 
opoly, and that the economies of combination and consoli- 
dation, either were not the motives for the formation of the 
company, or else that they were quickly and shamelessly 
cast aside. A state which did not, by its laws, forbid and 
prohibit and make penal such an aggregation of capital 
manifesting such purposes and directed and controlled by 
men displaying such motives and conducted in a way so 
hostile to the people and so injurious to the public inter- 
est, — a state which did not use every, means, legislative, 
executive, and judicial, to crush out such a trust or com- 
bination, could not be considered as a government that 
guaranteed and insured to its citizens the blessings of life, 
liberty, or property. Attorney-General Davies of New 
York only acted in the discharge of his official obligations 
when he instituted proceedings to dissolve the American 
Ice Company, but although he did only his sworn duty, 
he is entitled to praise and gratitude and to the loyal sup- 



The Remedy for the Evils 313 

port not only of the people of New York, whose servant 
he is, but of all who hate monopoly and oppression and 
exaction and extortion. We may, then, properly prohibit 
by law, — we should, in fact, prohibit by law any combina- 
tion which acts as a general restraint upon competition, * 
and which is formed for the purpose of raising prices, or 
which actually does raise prices beyond the fair profit mark. 
We can best tell whether there is such a restraint by ob- 
serving results. It would be an economic folly to forbid 
all combinations; neither should we be alarmed by great 
aggregations of industry. We have seen their wonderful 
economic advantages; we have noticed how such consolida- 
tions and combinations may, if rightfully used, bring not 
only riches to their promoters, but wealth to the nations; 
how they may enable us to obtain industrial supremacy; 
how they may give more constant employment to our 
laborers; how they may stimulate the demand for our raw 
materials; how they may lessen the price of manufactured 
goods; how they may bring us national and industrial 
prosperity and happiness. It is most difficult to say what 
combinations are proper and what ones improper, or to 
lay down any general rules by which one can determine 
whether a restraint upon competition is a good or an evil, 
whether it. is reasonable or unreasonable. Almost every 
case will have to be judged from the circumstances sur- 
rounding it and the courts will have to determine from all 
the facts of the case whether it is reasonable or unreason- 
able. They have done so in cases that have occurred. 
They have adjudged many combinations to be void be-* 
cause against public policy. It is very doubtful if we can 
obtain more satisfactory results by legislation. It may be 
regretted that we cannot more definitely determine and 
more explicitly declare what combinations are improper, 
and what restraints upon competition will be tolerated and 



3 14 The Trusts 

what ones prohibited. It is doubtless this feeling that has 
caused the enactment of our so-called anti-trust laws. Even 
the drastic ones adopted in many of our Southern and 
Western states ought not to be condemned as being in- 
spired wholly by envy or jealousy. They are probably so 
sweeping in their provisions, simply because it is desirable, 
especially in penal statutes, that there be no uncertainty as 
to what is forbidden. In order that unreasonable restraints 
upon competition may be punished and because of the 
doubt as to what is reasonable and what unreasonable, 
the legislators of many of our states, fearing the evils of 
monopoly and of a general restraint upon competition, 
have not infrequently forbidden all restraints of competi- 
tion. The motive that underlies the statutes has probably 
been good, but in the means adopted these legislators have 
almost always overreached themselves. The difficulty of 
proving purpose and motive has led them not infrequently 
to forbid even combinations and agreements that may or <lo, 
indirectly as well as directly, incidentally as well as inten- 
tionally, restrain competition. But when statutes so sweep- 
ing are enacted, they forbid the contracts which come up 
in our daily business negotiations and which are innocent 
in their character. The result is that the courts are com- 
pelled to construe these laws either as unconstitutional be- 
cause of being violations of our right to the use of our prop- 
erty, or else they are bound to construe them as referring 
only to unreasonable restraints. Mr. David Willcox, a New 
York lawyer, counsel for various trusts, in an article in 
The Forum for September, 1897, gave many illustrations of 
the vast number of every-day transactions which were pro- 
hibited by statutes of this character. We quote from him: 

"That these provisions are not directed especially against com- 
binations, is shown by the fact that the most ordinary and cus- 
tomary contracts or arrangements may incidentally restrain or pre- 



The Remedy for the Evils 315 

vent competition, although that may be only remotely, if at all, 
their object. As instances, may be suggested: All organizations 
of mechanics engaged in the same line of business for the purpose 
of limiting the number of persons engaged in the business, or of 
maintaining high rates of wages; a covenant in a deed restrict- 
ing the use of real estate; the formation of a corporation to carry 
on any business upon a large scale; a contract of partnership be- 
tween two persons previously engaged in the same line of busi- 
ness; the appointment, by two producers, of the same person to 
sell their goods on commission; the purchase, by one wholesale 
merchant, of the product of two producers; the lease or purchase, 
by a farmer, manufacturer or merchant of an additional farm, 
manufactory or shop ; the withdrawal from business of any farmer, 
merchant or manufacturer; the cessation of production of any 
agricultural or manufactured product, or the suspension of mining, 
because of lack of demand; a sale of the good- will of a business, 
with an agreement not to destroy its value by engaging in similar 
business. In fact, any one who suspends or withdraws from busi- 
ness, by that very act will, in some degree, restrain or prevent 
competition. Equally, any one who enlarges his business will re- 
strain or prevent competition by crowding out others. Examples 
might be multiplied indefinitely." 

The state can, then, — it must, then, if it discharges its 
duties towards its citizens, — prohibit the actual monopoly. 
It must forbid, and by penalties endeavor to prevent, all 
unreasonable restraints upon competition. It must declare 
criminal any combination for the purpose of raising prices, 
or which does in fact improperly raise prices. It is doubt- 
ful if it can constitutionally do more, since the Constitu- 
tion of the United States in the fourteenth amendment 
prohibits the states from depriving any person of life, lib- 
erty, or property without due process of law, and the right 
to property has been held by the courts to be the right to 
buy and sell, and to contract with reference to one's prop- 
erty, in any way which does not injure another. It would 
be folly for the state, even if constitutional, to endeavor to 
restrain all combinations, or to prohibit every restraint 



316 The Trusts 

upon competition; for we all know by actual experience 
and daily observation that competition is often excessive. 
We know that time and time again it has been impossible 
to stop the competition by mere quitting. It is only when 
all of the competitors would agree to stop that any of them 
could be induced to desist. To attempt to stop all com- 
bination would be to ignore all the experience of the past. 
The attempt would in all probability be futile. For years 
many of the states have had such laws, but their enforce- 
ment has been impossible. Trusts are more numerous to- 
day than ever before. But if we could stop all combina- 
tion, the success of the attempt would be the death-blow 
to industry. For the United States to forbid all combina- 
tions, to forbid even great combinations, would be to throw 
aside the magnificent opportunity we have to-day of obtain- 
ing the markets of the world and of winning industrial 
supremacy among the nations. 

Such are the remedies we would propose for trust evils. 
But it is not amiss to discuss here certain remedies sug- 
gested by others, especially the proposition to restrain com- 
binations, by limitations upon corporate powers and cor- 
porate capitalization. 

The only visible effect of our anti-trust laws up to this 
time has been to bring about a change in the form of com- 
binations. We no longer have the trust proper; the 
" agreement " combine still exists, but the corporation il 
the favorite form of combination, because it is much easier 
for the corporation to pose not as a combination, but as a 
new legal entity. There are some who, observing the great 
evils that come from the over-capitalized trust, think that 
our anti-trust laws have made matters worse than they 
were before their passage; that they have not enabled us 
to escape the old evils, but have piled upon us a host of 
new ones. We are inclined to believe that on the whole 



The Remedy for the Evils 317 

the state is in a much more advantageous position by rea- 
son of having trusts in corporate form. Corporations are 
artificial creatures of the state, owing their life to it, and 
peculiarly subject to limitations by it. We can, if we 
marshal our resources and gather together our forces, deal 
effectively and successfully with the corporations, even 
with the great corporations, and with all the problems 
arising from them. Anti-trust legislation has not been in 
vain if it has made trusts become corporations, for we can 
handle the corporations, if we choose. To enact anti- 
trust laws in order to compel combines to become corpora- 
tions, and to be able, in this form, to remedy the evils of 
trusts is, it must be admitted, much like the practice of a 
certain doctor who could cure no disease but fits and who, 
therefore, whenever he was called in to visit a patient, pro- 
ceeded to throw him into a fit, and then to cure him. If, 
after all the remedies that have been mentioned have been 
tried, we find that the trust is still a power for evil, then 
we can limit the size of corporations; we can prevent them 
from consolidating with each other; we can forbid their 
selling their stocks one to the other, or selling their plant, 
or anything but their product, without an order of the 
court made for sufficient cause. We can demand the full- 
est publicity, and can impose upon these creatures of the 
state such restrictions and limitations as their Creator may 
deem wise. 

It has already been urged by economists as well as by 
statesmen that we should limit not only the size of our 
great corporations, but the purposes for which they may bo 
formed. Such is the suggestion of Prof. Henry C. Adams, 
of Michigan University, while throughout certain sections 
of our country there is a popular feeling of approval. 

Much of the opposition to modern corporations is but a 
new instance of the recurring opposition to every industrial 



318 The Trusts 

advance which manifests itself in the formation of larger 
business organizations. It is no new thing to ask for the 
prohibition of the increase in the size of industrial organ- 
izations. Such requests have been frequent throughout 
industrial history. No forward step has ever been taken 
without the timid and hesitating and doubtful crying out 
in alarm. More than one hundred and fifty years ago, 
when strictly individual ownership and management of 
property were giving way to the partnership form, a great 
cry went up. People considered it a restraint on trade 
and in alarm asked what was to become of manly inde- 
pendence. When the small business corporations began to 
displace the cumbersome partnerships, timorous people 
fairly felt the clutch of monopoly, so great was their 
alarm and fear. There is no question that the transition 
from the partnership to the corporate form excited as much 
alarm and as much opposition as the phenomenon of trusts 
does to-day. Adam Smith tried to quiet the popular unrest 
by attempting to prove that the corporate organization of in- 
dustry would never be successful or popular, and could 
never do much harm because it was adapted only to a few 
simple routine branches of business, and that it never 
could obtain loyal and efficient service from its employees 
because in his opinion " people would not work for corpor- 
ations as they would for themselves." 

In many sections of the country, to-day, hatred and ani- 
mosity towards corporations are fostered and engendered. 
This is remarkably true in those sections which, from the 
nature of their resources, are necessarily largely agricul- 
tural, and which, therefore, do not permit of combinations 
of capital to develop them. Forgetful of all the wonderful 
progress of the country due to corporations, unmindful 
that it is the industrial prosperity of the East, built up by 
corporate wealth, that gives to the West and the South the 



The Remedy for the Evils 319 

nearest and steadiest and richest market for their agricul- 
tural products, and which, through its mills and factories, 
creates the demand for their raw materials, and equally- 
forgetful of the fact that the development of the West and 
South themselves is due to the improved means of trans- 
portation and communication that are possible only when 
capital is enormously concentrated, and that that develop- 
ment has also been furthered by corporate capital engaged 
in manufacturing, and resulting in furnishing to the West 
and South cheaper tools, cheaper agricultural implements, 
cheaper clothing and cheaper commodities generally — 
forgetting all these things, in these sections there exists 
widespread fear of corporations, distrust of their motives 
and methods, and animosity towards their organizers and 
directors. 

Corporations of enormous size are an absolute necessity 
to-day to do the work 01 the world. One undertakes the 
answer of a perplexing question when he endeavors to say 
how much capital a corporation should be allowed to have. 
Even within the limits of one trade or industry it is almost 
impossible to determine the question satisfactorily. It 
would be a dangerous business policy to fix an arbitrary 
limit to capitalization — to say, for instance, that no cor- 
poration could be incorporated with a capital exceeding $1,- 
000,000 or $10,000,000. In one industry either sum might 
be insufficient to permit economical production, while in 
another it might enable the corporation to obtain a mon- 
opoly. Not, at least, until we have learned that there are 
evils in the gigantic corporations which cannot be other- 
wise averted can we afford to imitate Procrustes, the tyrant, 
who placed all his victims on one bed, stretching those who 
were short till they fitted it, and cutting off the legs of 
those who were too long. Furthermore, in any one par- 
ticular industry, it would be most difficult, as well as dan- 



320 The Trusts 

gerous, to say what limit should be fixed to capitalization; 
although, if monopoly can be prevented in no other way, 
the limitation of capitalization is a practical method of 
procedure. One set of incorporators may possess such con- 
nections, have such skill, and meet with such success that 
it can profitably employ many times the capital that 
another set can use. The formation of corporations 
should be regulated by general laws. There are many ob- 
jections of the gravest character to any attempt to make a 
special determination as to the amount of capitalization 
that any corporation or class of corporations shall have. 
It would be dangerous to attempt to pass upon each sep- 
arate case. Favoritism, bribery, and every form of corrup- 
tion are incidental to special legislation. If there is special 
legislation, or even special adjudication, as to the necessity 
or wisdom of granting a charter, or as to the amount of 
capital, there will be abuses and scandals of every sort. 
The right to incorporate will, then, surely become a special* 
privilege. It will be obtained by the great and the cor- 
rupt, and denied to the weak; and the ability to incorpo- 
rate will then become a monopolistic right. 

Until experience has demonstrated that corporate abuses 
are beyond practical control, it would seem to be equally 
unwise to say that capital may clothe itself in corporate 
form and seek corporate management only when used in 
certain particular industries or kinds of enterprises. Prof. 
Adams has suggested that corporations should be created 
only for purposes of transportation or for the management 
of enterprises that are in their nature public or quasi- 
public; that the right to engage in ordinary enterprises 
and industries which can be carried on by individuals, 
either singly or associated in other than corporate relations, 
should be denied to corporations. While this cannot be 
discussed here with the fullness that so momentous a sug- 



The Remedy for the Evils 321 

gestion by so eminent an authority deserves, it need only 
be said that such a course would be contrary to a tendency 
so universal as to be apparently natural and irresistible, 
and it would appear to be a retrogression in the industrial 
march. 

Hon. Dudley G. Wooten of Texas, the first vice-chair- 
man of the Chicago Trust Conference, in a most eloquent 
speech upon that occasion, in w T hich he denounced indus- 
trial corporations, big and little, and urged that charters 
should not be granted to them to engage in business enter- 
prises in which individual effort could work profitably, 
said: 

"It ought to be impossible for corporations to be chartered for 
any other than a quasi-public purpose with a capital authorized 
beyond a reasonable amount commensurate with the equality be* 
tween natural and artificial citizenship and industry." 

In an earlier part of his speech he said of the people of 
Texas: 

"We are mainly producers of raw materials and consumers of 
manufactured products," 

and then he pointed out how Texas felt particularly injured 
by trusts. Is not the experience of Texas itself a proof of 
the economic injury of the policy so eloquently urged by 
Mr. Wooten? No community can become rich without 
labor. The greater the amount of work it puts forth, the 
more valuable the product. No state can become prosper- 
ous without a diversity of industry. A purely agricultural 
community can never be very rich, but a community that 
takes its raw products and applies to them the labor neces- 
sary to perfect them for final consumption, adds to the 
value of what it possesses and increases the wealth that will 
flow into it when the finished product is sold or exchanged 
for the other material comforts of civilization that it needs. 



322 The Trusts 

Agriculture does not in its immediate operations require 
vast capital. Individual effort is sufficient, coupled with 
individual savings or borrowings. Indirectly, however, 
successful agriculture is indebted to centralized capital for 
improved machinery and tools. Manufacturing, on the 
other hand, cannot be carried on successfully except when 
the capital of many is combined with the labor and the 
toil of many. Would not Texas, with its vast area and 
great resources, be a more prosperous community if it en- 
couraged associations and combinations of capital to build 
factories in its midst, instead of crippling them? Would 
not its farmers, by bringing into the state persons who en- 
gage in other fields of industry, find an increased army of 
consumers, whose demand for agricultural products would 
increase the prices which, according to Mr. Wooten, trusts 
tend to depress? Would not the multiplication of fac- 
tories give to Texas people an opportunity to buy manu- 
factured articles more cheaply, and thus offset that alleged 
tendency of industrial trusts to impose extortionate prices? 
Favorable corporation laws will not in themselves establi-h 
industries; but unfavorable ones will surely prevent their 
establishment and kill those now in existence. Would it 
not be wiser for Texas to try this remedy for trusts? 

While, in the present stage of the trust problem, any at- 
tempt to limit either the size or the purposes of corpora- 
tions seems to be a premature and ^hazardous remedy 
because of the probable crippling of our productive powers 
and the impairing of our chances of securing markets; 
while it scorns much wiser to endeavor to ensure equality 
of opportunity and fairness in competition, to abolish all 
special privileges, to have publicity of all matters affecting 
the public, and then let all producers and distributers 
fight it out on the same line, each one being allowed to 
bring together and make use of whatever amount of capi- 



The Remedy for the Evils 323 

tal he can profitably employ, — still if it be found after a 
trial that there are dangers in this course and that monop- 
oly does exist as a result thereof, then the limitation of the 
amount of capitalization of our great corporations is the 
quickest and most practical and most certain way of pre- 
venting them from acquiring a controlling interest in any 
industry. It is not extremely improbable that we will be 
forced to limit their acquisition of those properties which 
are more or less natural monopolies, such as copper, iron, 
coal, gold, and silver mines. But, at best, the limitation 
of the capitalization or of the purposes of corporations is a 
kind of compromise measure. It will possibly save us from 
some of the evils of monopoly. It will secure to us a part, 
but only a small part, of the benefits of combination. We 
will save only a few of the wastes of competition. We 
may obtain nearly all the benefits that relate to mere pro- 
duction itself, but we are certain to lo6e most of the econ- 
omies of distribution. 

The problem of trusts subbests the possibility of social- 
ism, or of that modified form of socialism which is called 
government ownership. The tendency towards concentra- 
tion is, in the opinion of many, the steady march towards 
socialism. No one feels more certain of this than the 
socialist himself ; no one is more sanguine than he in his 
observation of the size and the power of trusts. At their 
possibilities of monopoly he looks complacently, believing 
that when industry shall have reached the final point of 
extreme centralization its management and ownership wi.il 
be wrested away from those now possessing it and taken 
over by the people in their collective capacity. Those who 
entertain these views say that the encouragement of the 
establishment of competitive enterprises against existing 
trusts is not desirable, even to keep down prices. They 
argue that, if a given number of factories, either run 



324 The Trusts 

separately or by one trust, is enough to supply the de- 
mand for commodities of that kind, then it is an economic 
waste to add to this number of factories. They point out 
that to encourage competition is contradictory to the al- 
most universal tendency of the present day to combine for 
the very purpose of saving the loss of undue competition. 
They show that the encouragement of small competitive 
enterprises prevents the savings that trusts or combina- 
tions could otherwise effect, and they claim that in encour- 
aging the return of competition we are slowly undermining 
the power of trusts for good, and that we are only a little 
less foolish than those who so fear the power of trusts that 
they render them useless as well as harmless by limiting 
the capitalization of corporations to so small a sum that 
they cannot acquire enough property to avail themselves 
of the means and methods of economical production and 
distribution. These persons reprove us for our failure to 
appreciate what they consider the true teachings of the 
universal tendency to restrict competition. They reproach 
us for our hesitancy in trying that solution of all these 
vexing problems which they think this universal tendency 
suggests, and which they deem to be not only correct 
theoretically, but sufficient practically. That remedy is in 
some form or other socialistic. It implies either govern- 
ment ownership or management. The reasoning of the 
advocates of remedies of this kind is plausible, and it can- 
not be denied that they occasionally fortify their argu- 
ments with incontrovertible facts. They themselves are 
in no-wise dismayed by the extent of the task. They look 
at the number of instances of municipal ownership of 
waterworks in America, of government ownership of rail- 
roads and telegraphs in Europe, and ownership by F.uro- 
pean cities of street railways and of gas and electric light 
properties, and af American laws regulating rates of fare 



The Remedy for the Evils 325 

and freight on railways, and find in them precedents, as 
well as encouraging examples of governmental control and 
ownership. Doubtless certain lines of business, particu- 
larly transportation — not only trunk lines, but city surface 
systems — and the providing of water, gas, and electricity, 
and the disposal of sewage and kindred public services, are 
natural monopolies, and may properly and successfully be 
assumed by cities and states; but to undertake govern- 
ment control of those industries in which trusts are 
formed, namely, manufacturing, mining, and mercantile 
industries, is to enter upon a task of a very different char- 
acter. Government ownership of such industries may be 
called, not improperly, socialism in its advanced stage. It 
may be that in distant ages that will be the form of busi- 
ness management, but it surely is one of the ideals to be 
realized only in the millennium. 

Government control of corporations is not the same as 
government ownership, but it is an approach to it. It is 
probably fortunate that the trusts of to-day are corpora- 
tions rather than individuals, for being creatures of law, 
they are properly subject to restriction by law. It has 
been seriously suggested that the proper course with regard 
to industrial combination is to encourage or permit the 
formation of gigantic corporations which may, if desired 
by their organizers, obtain all the productive agencies of any 
one industry; and then to enact laws limiting their profits, 
or arbitrarily fixing prices. Doubtless it would be possible 
to enact laws limiting dividends, and perhaps it would be 
possible to express the laws in suc l h terms as to prevent 
many evasions, and practically to accomplish the purpose 
of the act; namely, to limit prices. The penalty for refus- 
ing to do the work for which a company was incorporated, 
at prices which would produce the profit arbitrarily fixed, 
would be dissolution, Doubtless a state or a government 



326 The Trusts 

could with perfect propriety say to a corporation of its 
creation, at the time of its incorporation, that it should 
charge only a certain price for a certain service, or that all 
of its profits above a certain amount should revert to the 
state. States have been known to do similar things in the 
case of railroad and gas companies and other quasi-public 
corporations. But economically it would be the height of 
folly to do this whenever competition was practicable. 
There are many objections to a scheme to limit profits. 
One is that it is manifestly unfair to impose a limit unless 
a fair profit is practically guaranteed. 

The vital objection, however, is that a limit to profits 
means a halt to industrial progress. If a corporation can 
declare no dividend in excess of a fixed per cent, there is 
no inducement for it to cheapen its product. There is no 
incentive to inventive talent. What would be the use of 
introducing a labor-saving machine if one did not make 
more money by so doing? To limit dividends would be 
the worst folly imaginable. It would be less foolish to 
limit prices; to say to a great monopoly: " You shall not 
charge more than this sum, but if you introduce labor- 
saving machines and are thus able to produce more cheaply 
and to make a greater profit at those prices, you may have 
it." Who is there, however, wise enough to say what 
prices shall be charged? Dividends could possibly be lim- 
ited, with provisions that any savings which were the result 
of cheaper processes or labor-saving machinery should 
accrue for limited periods to the persons introducing them, 
just as we give temporary monopolies to inventors. But 
all limitations on profits are restraints upon progress; the 
danger from them is that industry may become stagnant 
and dormant and decadent. 

The belief in abstaining from intervention in private 
"business matters is, moreover, so deep-rooted in Americans 



The Remedy for the Evils 327 

that a proposition to limit the profits of corporations 
would be reluctantly adopted even as a last resort. Un- 
questionably, in the face of the very fact that business is 
everywhere being organized into great combinations for 
the purpose of killing competition, the people of this coun- 
try prefer still to trust to the restraining influence of the 
active competition that survives and to potential competi- 
tion, and to enact laws that will place competitors on an 
equal footing, rather than to socialize industry and upset 
all their established systems and notions. Government 
ownership, or government management or control of ordi- 
nary business enterprises by means of price regulation or 
dividend limitation., is an iridescent dream. It is a matter 
more of speculation than practical statesmanship. It may 
be a live issue long before the sun grows cold, but it is not 
the matter at hand. It is not the duty that lies before us. 
The practical man of the day — the man who suffers the 
evils of trusts and who seeks remedies — still believes that 
relief is to be found in the preservation of competition, 
and the remedies that he would adopt are remedies that 
seek to remove the obstacles to free and fair competition, 
namely, the abolition of special privileges, the prohibition 
of unfair competition, the requirement of that open pub- 
licity which calls competition into being, the punishment 
of all unreasonable restraints upon competition, the pre- 
vention of everything which creates actual monopoly or 
which is formed for the purpose of raising prices or which 
actually does raise prices. All these are remedies that tend 
to preserve that system of industry which, with all its 
wastes and sacrifices, all its evils and injuries, has neverthe- 
less been the secret of all industrial success an'd of the 
world's prosperity. 

The real need of the day, the pressing need, is informa- 
tion — publicity. We need it, not only in order to know 



328 



The Trusts 



what to do, but as a remedy in itself. If we can have this 
publicity we can rely to a great extent upon competition, 
active as well as potential. We cannot for any great length 
of time be made the victims of extortion by trusts if their 
methods are open. We shall net long be charged more than 
a fair profit if their profits are known. High prices and 
big profits, if known to the public, will surely bring that 
competition which, through all history, has saved us, and 
which is as certain in its operation as natural forces. Cap- 
ital will as surely be attracted to enterprises known to be 
profitable as the needle of the compass is sure to be at- 
tracted to the north. This is so, even although new estab- 
lishments are not really needed for productive purposes. 
Knowledge is power to those who seek to ward off monop- 
oly, but popular ignorance of their profits is the great 
secret of the trusts' occasional ability to charge undue 
prices. 

Publicity by officers and directors and promoters of all 
our great corporations may not be a complete cure, but it 
is sure to be one of the most effective remedies for all the 
evils of trusts. It will unquestionably restrict the creation 
and establishment of all those trusts whose purposes are to 
plunder the community and to fleece investors; probably 
half of the trusts that now exist would never have been 
formed had there been publicity. It will counteract all 
the dangerous possible tendencies of the* trusts which arc 
honestly organized as moans of cheaper and more abundant 
production, and it will enable them the better to serve their 
true purpose. It will be a protection to the shareholder 
and to the investor; it will be a ki body-blow," even if not 
a death-blow, to extortionate prices; it will be the stimulus 
to higher wages and to better prices for raw materials; it 
will be the certain preventive of railroad discrimination 
and of all special favoritism: and the effective curb upon 



The Remedy for the Evils 329 

every attempt by corporations to corrupt legislatures and 
public officials. There is hardly an evil — either those in- 
herent or supposedly inherent in trusts, or those incidental 
to them — which full and complete publicity will not do 
much to remedy, even if it does not cure completely. 

A step, then, of immediate practical importance, a rem- 
edy that, in the present light, we should employ for trust 
evils — one that permits the continuance of the universal 
tendency to consolidation which has so far always brought 
success to industry and which means cheap production and 
distribution, and yet one that holds us back from the social- 
ism which would strike down individualism — is the remedy 
of publicity. 

Demosthenes, when asked what are the three great 
essentials of oratory, replied, " First, action; second, action; 
third, action." If asked what is the remedy for the great 
evils, industrial, social and political, which are inherent or 
incidental to trusts, our answer would be, " First, public- 
ity; second, publicity; third, publicity," — the remedy which 
is most effective in itself and the remedy which alone can 
suggest the fourth and all others that may be needed. 



Appendix A 



THE FEDEKAL ANTI-TETTST ACT, COMMONLY 
KNOWN AS THE SHEEMAN ACT. 

This act is entitled, " An act to protect trade and com- 
merce against unlawful unrestraints and monopolies." It 
was approved July 2d, 1890. The act is as follows: 

Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled: 

Sec. 1. Every contract, combination in the form of trust or 
otherwise, or conspiracy, in restraint of trade or commerce among 
the several states or with foreign nations, is hereby declared to be 
illegal. Every person who shall make any such contract or en- 
gage in any such combination or conspiracy shall be deemed guilty 
of a misdemeanor, and, on conviction thereof, shall be punished by 
fine not exceeding five thousand dollars, or by imprisonment not 
exceeding one year, or by both said punishments, in the discretion 
of the court. 

Sec 2. Every person who shall monopolize or attempt to mon- 
opolize, or combine or conspire with any other person or per- 
sons to monopolize any part of the trade or commerce among the 
several states or with foreign nations, shall be deemed guilty of a 
misdemeanor, and, on conviction thereof, shall be punished by 
fine not exceeding five thousand dollars, or by imprisonment not 
exceeding one year, or by both said punishments, in the discretion 
of the court. 

Sec. 3. Every contract, combination in form of trust or other- 
wise, or conspiracy, in restraint of trade or commerce, in any ter- 
ritory of the United States or of the District of Columbia, or in 
restraint of trade or commerce between any such territory and 
another, or between any such territory or territories, and any 

33i 



33 2 Appendix A 

state or states or the District of Columbia or with foreign nations, 
or between the District of Columbia and any state or states or 
foreign nations, is hereby declared illegal. Every person who shall 
make any such contract or engage in any such combination or con- 
spiracy shall be deemed guilty of a misdemeanor, and, on convic- 
tion thereof, shall be punished by fine not exceeding five thousand 
dollars, or by imprisonment not exceeding one year, or by both 
said punishments, in the discretion of the court. 

Sec. 4. The several circuit courts of the United States are 
hereby invested with jurisdiction to prevent and restrain violations 
of this act; and it shall be the duty of the several district attor- 
neys of the United States, in their respective districts, under the 
direction of the attorney-general, to institute proceedings in equity 
to prevent and restrain such violations. Such proceedings may be 
by way of petition setting forth the case, and praying that such 
violation shall be enjoined or otherwise prohibited. When the 
parties complained of shall have been duly notified of such peti- 
tion the court shall proceed, as soon as may be, to the hearing and 
determination of the case; and pending such petition and before 
final decree the court may at any time make such temporary re- 
straining order or prohibition as shall be deemed just in the prem- 
ises. 

Sec. 5. Whenever it shall appear to the court, before which any 
proceeding under section four of this act may be pending, that the 
ends of justice require that other parties should be brought be- 
fore the court, the court may cause them to be summoned, 
whether they reside in the district in which the court is held or 
not; and subpoenas to that end may be served in any district by 
the marshal therof. 

Sec. 6. Any property owned under any contract or by any 
combination, or pursuant to any conspiracy (and being the sub- 
ject thereof) mentioned in section one of this act, and being in 
the course of transportation from one state to another, or to a for- 
eign country, shall be forfeited to the United States, and may be 
seized and condemned by like proceedings as those provided by law 
for the forfeiture, seizure and condemnation of property imported 
into the United States contrary to law. 

Sec. 7. Any person who shall be injured in his business or prop- 
erty by any other person or corporation by reason of anything 
forbidden or declared to be unlawful by this act, may sue therefor 
in any circuit court of the United States in the district in which 



Appendix A 333 

the defendant resides or is found, without respect to the amount 
in controversy, and shall recover three-fold the damages by him 
sustained, and the cost of suit, including a reasonable attorney's 
fee. 

Sec. 8. That the word "person" or "persons," wherever used 
in this act, be deemed to include corporations and associations ex- 
isting under or authorized by the laws of either the United States, 
the laws of any of the territories, the laws of any state or the laws 
of any foreign country. 



Appendix B 



ANALYSIS OF THE BILL PASSED BY THE HOUSE 

OF EEPRESENTATIVES IN JUNE, 1900, 

AMENDING THE SHERMAN ACT. 

" The bill amends the Sherman anti-trust law so as to declare 
every contract or combination, in the form of trust or conspiracy 
in restraint of commerce among the states or with foreign nations 
illegal, and every party to such contract or combination guilty of a 
crime, punishable by a fine of not less than $500 nor more than 
$5000, and by imprisonment not less than six months nor more 
than two years. It provides that any person injured by a viola- 
tion of the provisions of the law may recover three-fold damages. 
The definition of ' person ' and ' persons ' in the present law i3 
enlarged so as to include the agents, officers or attorneys of cor- 
porations. 

" For purposes of commerce it declares illegal all corporations or 
associations formed or carrying on business for purposes declared 
illegal by the common law; provides that they may be per- 
petually enjoined from carrying on interstate commerce and for- 
bids them the use of the United States mails. It provides for the 
production of persons and papers; confers jurisdiction upon United 
States circuit and district courts for the trial *of causes under it 
and authorizes any person, firm, corporation or association to be- 
gin and prosecute proceedings under it." — Ex. 

334 



Appendix C 



SECTIONS FROM THE NEW YORK LAW TO PRE- 
VENT MONOPOLIES. 

The anti-monopoly law of New York is, t€ An act to pre- 
vent monopolies in articles or commodities of common rise, 
and to prohibit restraints of trade and commerce, provid- 
ing penalties for violations of the provisions of this act, 
and procedure to enable the attorney-general to secure tes- 
timony in relation thereto." This act became a law May 
7th, 1897, and is as follows: 

The people of the State of New York, represented in Senate and 
Assembly, do enact as follows: 

Sec. 1. Every contract, agreement, arrangement or combi- 
nation, whereby a monopoly in the manufacture, production or 
sale in this state of any article or commodity of common use is or 
may be created, established or maintained, or whereby competition 
in this state in the supply or price of any such article or com- 
modity is or may be restrained or prevented, or whereby for the 
purpose of creating, establishing or maintaining a monopoly 
within this state, of the manufacture, production or sale of any 
such article or commodity, the free pursuit in this state of any 
lawful business, trade or occupation, is or may be restricted or 
prevented, is hereby declared to be against public policy, illegal 
and void. 

Sec. 2. Every person or corporation, or any officer or agent 
thereof, who shall make, or attempt to make, or enter into, any 
such contract, agreement, arrangement or combination, or who, 
within this state, shall do any act pursuant thereto, or in, toward 
or for the consummation thereof, wherever the same may have 
been made, is guilty of a misdemeanor, and on conviction thereof 

335 



336 Appendix C 

shall, if a natural person, be punished by a fine not exceeding five 
thousand dollars, or by imprisonment for not longer than one 
year, or by both such fine and imprisonment; and if a corporation, 
by a fine of not exceeding five thousand dollars. 

Sec. 5. Whenever the attorney-general deems it necessary or 
proper to procure testimony before beginning any action or pro- 
ceeding under this chapter, he may present to any justice of the 
supreme court an application in writing for an order directing 
such persons as the attorney-general may require to appear be- 
fore a justice of the supreme court, or a referee designated in 
such order, and answer such relevant and material questions as 
may be put to them concerning any alleged illegal contract, ar- 
rangement, agreement or combination in violation of this chapter; 
if it appears to the satisfaction of the justice of the supreme 
court, to whom the application for an order is made, that such an 
application is necessary, then such an order shall be granted. . . . 

Sec. 6. (As amended* in 1899 by the so-called Donnelly 
Law.) No person shall be excused from answering any ques- 
tion that may be put to him, or from producing any books, 
papers or documents, on the ground that the testimony or evi- 
dence, documentary or otherwise, required of him may tend to 
incriminate him; but no person shall be prosecuted in any crimi- v 
nal action or proceeding, or subject to any penalty or forfeiture 
for or on account of any transaction, matter or thing concern- 
ing which he may testify or produce evidence, documentary or 
otherwise, before said justice or referee appointed on order for 
his examination, or in obedience to the subpoena of the court or 
referee acting under such order or either of them, or in any such 
case or proceeding. 

*It is under the above sections 5 and 6 that proceedings are 
pending for an examination of the officers 6i the American 
Ice Co. before Referee Nussbaum. Before amendment, sec- 
tion 6 permitted such examinations as hereinabove provided for, 
and declared that do evidence which a person was compelled to 
give in such proceedings could be used against him in any subse- 
quent criminal prosecution. It was held by the New York courts 
that this did not sufficiently comply with the constitutional pro- 
visions againd compelling a person to incriminate himself; hence 

the amendment as above, declaring that persons testifying in 

these proceedings shall have lull immunity from criminal prosecu- 

tion for acts as to which their testimony relates. 



Appendix D 

LIST OF ANTI-TRUST LAWS 

Title. Date of Enactment. 

The Federal Anti-Trust Act July 2, 1890. 

Alabama Insurance Act February 18, 1897. 

Arkansas Anti-Trust Act March 16, 1807. 

California Cattle Trust Act February 27, 1893. 

Delaware Life Insurance Law February 15, 1891. 

Florida Legislation Relating to Trusts and 
Monopolies for the Control of Trade in Cat- 
tle June 11, 1897. 

Georgia Anti-Monopoly Act December 23, 1896. 

Illinois Act Prohibiting Pools, Trusts and 

Combines June 10, 1897. 

Indiana Anti-Trust Act March 5, 1897. 

Iowa Anti-Pool and Trust Law May 6, 1890. 

Kansas Law Prohibiting Trusts March 8, 1897. 

Kentucky Law Prohibiting Pools, Trusts and 

Conspiracies May 20, 1890. 

Louisiana Law for the Prohibition of Trusts 

and Combinations in Restraint of Trade... July 7, 1892. 

Maine Anti-Trust Law March 7, 1889. 

Michigan Anti-Trust Act July 1, 1889. 

Minnesota Law to Prohibit Pools and 
Trusts April 20, 1891. 

Mississippi Law Prohibiting Trusts and Com- 
bines March 11, 1896. 

Missouri Anti-Trust Act 1891, 1895, 1897. 

Montana Statute against Monopolies and 
Trusts 1895. 

Nebraska Statute against Trusts and Con- 
spiracies against Trade and Business 1895, 1897. 

337 



33 8 Appendix D. 



3 

Title. Date of Enactment. 
New Mexico Law Declaring Trust Combina- 
tions Illegal February 4, 1891. 

New York Law to Prevent Monopolies May 7, 1897. 

North Carolina Law for the Prohibition of 

Trusts March 11, 1889. 

North Dakota Law Declaring Certain Trusts 

and Combinations Unlawful March 9, 1897. 

Oklahoma Law to Prevent Combinations in 

Restraint of Trade December 25, 1890. 

South Carolina Prohibition of Trusts and 

Combinations February 25, 1897. 

South Dakota Anti-Trust Law March 1, 1897. 

Tennessee Law to Prohibit Conspiracies and 

Trusts April 6, 1889. 

Texas Law for the Suppression of Trusts and 

the Promotion of Free Competition March 30, 1889. 

Utah Law Prohibiting Pools and Trusts March 9, 1896. 

Washington Law Forbidding Trusts and 

Monopolies March 21, 1895. 

Wisconsin Statute Prohibiting Trusts and 

Combinations in Restraint of Trade April 27, 1897. 



PUBLICATIONS OF 

THE BAKER & TAYLOR CO., 

Publishers and Booksellers, 

5 and 7 EAST SIXTEENTH STREET, NEW YORK. 



JTOSIASr STRONG'S WORKS. 

EXPANSION, UNDER NEW WORLD-CONDITIONS. 

By Josiah Strong, author of " Our Country," 
" The New Era," " The Twentieth Century City," 
etc. 12mo, cloth, $1.00; paper, 50 cents. 

New conditions create new problems, new necessities, new 
duties, new opportunities. The twentieth century will dawn 
on a number of world-conditions which are new. The wave 
of migration has crossed our continent. No longer are there 
in the United States millions of farms to be had for the taking. 
Agriculture is growing relatively less important. We are be- 
come the leading manufacturing people in the world. A few 
years since we were satisfied with the home market; now we 
are competing for the markets of the world. The awakening 
of China is a fact of prodigious significance. The opening of 
an Isthmian Canal will be a world-event of prime importance. 
There is beginning a world-life which is new and which will 
profoundly change national relations and national policies. 

The question of expansion is discussed in the light of these 
and other new conditions, physical, industrial and social, as 
well as political. 

Dr. Strong has the rare quality of making figures and sta- 
tistics not only attractive, but fascinating, as is evidenced by 
the sale of several hundred thousand of his former books. 
The preparation of these works has kept his mind in contact 
with both the general and detailed phases of the questions in- 
volved in the intricate question of expansion, and has given 
him an equipment for the discussion which entitles him to a 
wide hearing. 

Sent, postpaid, on receipt of the price, by 

THE BAKER & TAYLOR CO., Publisher.. 

5 and 7 East Sixteenth St., New York. 



BAKER & TAYLOR CO: 8 PUBLICATIONS. 

OUE COUNTRY: Its Present Crisis and its Pos- 
sible Future. By Rev. Josiah Strong, D.D. 
12mo, 275 pp., paper, 30 cents; cloth, 60 cents. 
Revision based on the Census of 1890. A new edi- 
tion (160th thousand). 

The many thousands who read the earlier editions of this 
book, and were moved by its striking portrayal of our relig- 
ious, social, and economic condition and tendencies, will learn 
with interest that the author has availed himself of the latest 
statistics of the Census of 1890 to make a revision of his work, 
which causes it to show the changes of the last ten years, and 
to picture the actual situation of to-day. The matter of the 
book has been increased one- third, and a map and diagram 
forcibly illustrate some of the more startling statistical facts 
and comparisons. 

" This volume is a storehouse of information. We recall no 
recent volume which has so much packed into it of value for 
the minister, the editor, the teacher, and, in general, the patriot, 
as this little volume on ' Our Country.' " — Christian Union. 

" Its facts are collated and marshalled with rare skill. It is 
a powerful and patriotic book. It stirs the blood; it warms ; 
it inspires; it thrills and it instructs. It ought to be read by 
every citizen of the Republic; it will be read by all our people 
who wish to keep abreast of needful knowledge regarding our 
country. " — Christian Inquirer. 

u If the means were at our command, we know of no service 
we could perform more practical and effective for the cause of 
truth and righteousness than to place a copy of ' Our Country ' 
in the hands of every man and woman in the land." — Christian 
at Work. 

"Words are feeble in the recommendation of this book. It 
enlightens, stirs, quickens, and makes the blood boil with 
patriotic zeal and Christian vehemence." — Pulpit Treasury. 

11 No publication of the present decade has awakened a more 
profound and intelligent interest. In its present form, and it 
is still compact and easily handled, we again commend it to 
all Christian and patriotic American citizens. M — New York 
Observer. 

Sent postpaid, on receipt of the price, by 

THE BAKER & TAYLOR CO., Publishers, 

5 and 7 East Sixteenth St., New York. 



BAKER <fc TAYLOR CO.'S PUBLICATIONS. 
DB. JOSIAH STBONG'S NEW BOOK. 

THE NEW ERA. By Dr. Josiah Strong, author of 

"Our Country.'' 350 pages. Library Edition, 

cloth, gilt top, $1.50 ; plain cloth, 75 cents ; paper, 

35 cents. 

Contents. — I. The Nineteenth Century one of Prepara- 
tion. II. The Destiny of the Race. III. The Contribution 
made by the Three Great Races of Antiquity. IV. The 
Contribution made by the Anglo-Saxon. V. The Authori- 
tative Teacher. VI. The Two Fundamental Laws of Christ. 
VII. Popular Discontent. VIII. The Problem of the Coun- 
try. IX. The Problem of the City. X. The Separation of 
the Masses from the Church. XL The Mission of the Church. 
XII. The Necessity of New Methods. XIII. Necessity of 
Personal Contact. XIV. Necessity of Co-operation. XV. 
The Two Great Principles Applied to the Two Great Prob- 
lems. XVI. An Enthusiasm for Humanity. 

" 'The New Era* is a mighty book."— Pres. C. F. Thwing, 
Western Reserve University, Cleveland, Ohio. 

" It is a glorious book. It surpasses even his first book and 
ought to have millions of readers. " — Rev. Theodore L. 
Cutler, D.D. 

" Ought to be read by everybody interested in the advance- 
ment of the race." — New York Observer. 

" Ought to be distributed in every church, every Sunday- 
school and religious convention. ,, — Evangelist, N. Y. 

"We have found the 'New Era' abounding in facts thai 
are food for the thought of every teacher, preacher, public 
speaker, and of every man of any influence in social, business 
or political life. It is a book that it pays to read, and to read 
carefully/' — Albany Evening Journal. 

"All in all, and in every way, this is an eminently timely 
and valuable book. It is full of facts, is carefully thought 
out, is admirable in point of style, is conceived in the finest 
Christian spirit, and will serve to contribute a distinct element 
in the personal ' higher education ■ of every one who reads it. 
The two books, 'Our Country* and 'The New Era/ fitly 
supplement each other. " — Advance, Chicago. 

Sent, postpaid, on receipt of the price, by 

THE BAKER & TAYLOR CO., Publishers, 

5 & 7 East Sixteenth St., New York. 



BAKER & TAYLOR CO.'S PUBLICATIONS. 

THE TWENTIETH CENTURY CITY. By Kev. 

Josiah Stkong, D.D., author of " Our Country n 
and "The New Era." 16mo, paper, 25 cents; 
cloth, 50 cents. 

With the same fascinating presentation of facts and figures 
which made "Our Country " one of the great books of the 
century, Dr. Strong discusses the danger arising from the vast 
movement of population towards the cities and the growth of 
their preponderating influence in the Nation, points out the 
principles which may be applied successfully to the solution of 
the great problems of modern society, and makes a ringing 
appeal for action. 

Contents.— I. The Materialism of Modern Civilization. 
II. A Nation of Cities. III. The Materialistic City a Men- 
ace to Itself. IV. The Materialistic City a Menace to State 
and Nation. V. Remedies — The New Patriotism. VI. Reme- 
dies—Twentieth Century Christianity. VII. Remedies — 
Twentieth Century Churches. VIII. Remedies — Practical 
Suggestions. 

' * A power wherever it is read. It should be in the hands 
of every teacher, preacher, editor, public speaker and thou- 
sands and thousands of thinking men in all departments of 
life."— New York Christian Advocate. 

1 ' Dr. Strong's new book possesses the same fascination of 
style and the same convincing statements of facts and figures 
as ■ Our Country.' It is full of meat to the student and think- 
er, for the politician and statesman, for the office-holder and 
the voter." — Charleston News. 

'* 'The Twentieth Century City' is a book that will help 
every man who reads it to be a better citizen. It is a strong, 
sensible, excellent book." — Boston Journal. 

"The Rev. Dr. Josiah Strong's new book 'The Twentieth 
Century City ' is worthy of cordial welcome by* every lover of 
progress and well-wisher of mankind — this not only on ac- 
count of the theme, but also because of the spirited method 
of the author." — Eagle, Brooklyn, N. Y. 

Sent, postpaid, on receipt of the price, by 

THE BAKER & TAYLOR CO., Publishers, 

5 and 7 East Sixteenth St. , New York, 



BAKER & TAYLOR CO.'S PUBLICATIONS. 

A POPULAR TREATISE ON INDUSTRIAL 
ORGANIZATIONS. 

THE TKUSTS: What Can We Do with 
Them? What Can They Do for Us? By 
Hon. William Miller Collier, New York State 
Civil Service Commissioner, author of " Collier on 
Bankruptcy," etc. 12mo, 348 pages, cloth, $1.25; 
paper, 50 cents. 

A careful discussion of the economic and political questions 
springing out of the great trust problem, dealing with the in- 
dustrial benefits and evils of trusts, and also the necessary re- 
strictions and limitations that must be put upon them. Mr. 
Collier shows in what way large industrial organizations are 
necessary for the proper accomplishment of the gigantic busi- 
ness undertakings of the day, especially in developing and 
extending our foreign trade and in securing markets for our 
surplus products, and he also considers the extent to which 
they limit competition and are monopolies. He discusses the 
nature and scope of legislative powers over trusts, the evil of 
over- capitalization, the effect of trusts upon wage-earners and 
farmers, and the proper remedies for the evils of trusts. The 
social phase of the question is considered in a chapter entitled 
" The Man and the Dollar," with special reference to William 
J. Bryan's famous speech at the Chicago Trust Conference. 
The relations of the tariff and of territorial expansion to the 
trusts are exhaustively considered. 

The topics are as follows: The Day of Great Things. What 
is a Trust ? The Mother of Trusts. The Wastes of Competi- 
tion. What is Monopoly? Prices and Potential Competition. 
Trusts and Wage-Earners. Trusts and Displaced Labor. 
Trusts and the Farmer. Trusts and Special Privileges. Pro- 
motion, Over- Capitalization, and Publicity, or Wind, Water, 
and Light. Whose Fault is It ? Trusts and Expansion. The 
Man and the Dollar. Legislative Powers over Trusts. The 
Remedy for the Evils. The Federal Anti-Trust Law (Sher- 
man Act). Analysis of Amendments Proposed to Same. 
Sections of New York Anti-monopoly Law. 

Sent, postpaid, on receipt of the price, by 

THE BAKER & TAYLOR CO., Publishers, 

5 and 7 East Sixteenth St., New York. 



BAKER <&» TAYLOR CO.'S PUBLICATIONS 



An Epitome of the English Language of To-day 



The Students' Standard Dictionary 

an abridgment of the famous Funk & Wagnalls' 
Standard Dictionary. Moderate sized, but full, 
easily handled, low-priced. Contains 923 pages, 
60,000 words, 1,225 illustrations. Incomparably 
the newest and best Dictionary in existence for the 
every-day use of English-speaking people. 

Thoroughly new from cover to cover with exclu- 
sive features of extraordinary importance. It is the 
work throughout of many eminent specialists. Every 
particular of its arrangement has been especially 
designed to fully meet the most exacting require- 
ments of the modern dictionary. In its ampleness, 
accuracy, authority, and in every other of its valuable 
features, it completely supersedes all the older 
abridged dictionaries. The value and convenience 
of its vocabulary and appendix characteristics have 
never been approximated by other works. The type, 
paper, and binding are of the highest quality. 

** This is a treasure. No one can conceive the wealth of information, 
the convenience for reference, the elimination of non-essentials which 
make this book worth much more than the price to any student, 
teacher, or writer."- -Journal of Education, Boston. 

44 To say that it is far ahead of any students' dictionary that has yet 
been published is only giving it the praise it deserves. There is noth- 
ing in the same field to-day that can excel W." —Brooklyn Eagle, 

" It should have a place in every school and upon every table where 
accurate scholarship and good taste are appreciated at their true 
worth."— William F. Phelps, Director State Normal Schools, 
St. Paul, Minn. 

8vo, Heavy Cloth, Leather Back, $3.50 net 
Full Leather, $4.00 net 
Thumb Index, 50c. extra 



Sent prepaid on receipt of the price by 

THE BAKER & TAYLOR COMPANY 

5 and 7 East J6tb Street, New York 



AUG 4 1900 



\ 6 1951 



o° s£LL**% 







o-, ~* B \\+ <t> V'«V^ '.^ 










fc.^ 



% 



•a <L* 

'If *? 




* ^y 






# 



V 



o, ^ 






^ * _ ' ,/ 



fr l o, *,f..^^ c>, ' ,^' q. 



^ 






. <£ 



fe, .& 



. <W 



^ 
<< 



<$> ^ 




■•^. v 












s* % 



















^ <*■ 






^o< 






^ <** 



^ 









X- 















% 












•6 \J V -^>0*Sv 










... 









^O, 4 o . j. * .\v -C), ' " » »■ - 












^ tf 



■ s " * ' ', <t> 






V * * * ' / -^ 






4? 

* r ^> A 



